6 Startup Strategies That Turn Off Most Investors

By: MartinZwilling

Based on my own experience as an angel investor, and feedback I get from many other investors, here are a collection of answers that we often hear instead, from the least credible to at least reasonable:

 1. Insist you have no competitors. Leading with this answer will likely terminate      any further investment opportunity with this investor. He or she will assume      your comment means there is no market for your product or service, or you      haven’t looked. Neither speaks well for you or your startup. Even if you hedge      by saying no direct competitors, we all know that existing cars are still big      competition to your new flying automobile.

 2. Claim the first mover advantage. This is one of the most frequent responses I      hear, and is rarely convincing. The problem is that startups have limited      resources to keep them ahead of big companies. If your early traction      highlights an opportunity they have missed, they can mobilize their huge      resources and run over you. First mover advantages are only sustainable by      large companies, or founders with deep pockets.

 3. Proclaim your solution as a paradigm shift. If you insist that your technology      is so new and unique that it will disrupt your competitors and the whole      market, investors will fear that neither they nor you can afford the time and      marketing required to weather the change. They will likely decline on the      basis that historically, pioneers get all the arrows.

 4. Highlight your world-class team as the secret sauce. Insisting that your team      is better than any other, giving you a sustainable competitive advantage for      the long term, will likely come across as naiveté or arrogance. Investors know      that no startup has a lock on the best people and processes, and investors      don’t deal with unrealistic founders.

 5. Declare that you will offer the product or service free. Free is a dirty word      to investors, since they need a return on their investment. Perhaps you intend      to collect money from advertisers, but this requires a large investment to get      the audience you need before monetization can work. Facebook spent over $150       million before revenue.

 6. Intellectual property as barrier to entry. I like patents, trademarks, and      trade secrets, so this answer is a better sustainable competitive advantage      than the other five answers. Now all you have to do is defend your position,      and we all know that patents can break a startup in court battles, and will      have alternative implementations if the price is right.

Thus, there is no perfect answer to this question, so the best entrepreneurs see it as an opportunity to highlight their own advantages, rather than put down a competitor. Being negative is never the answer. For example, it’s tempting to say that your worst competitor has poor quality products, requiring costly maintenance, but it’s much better to say that you provide a five-year free warranty that no competitor can match.

After highlighting your best competitive features and your intellectual property barriers to entry, I encourage you to put on your humble face, and proclaim your determination to never stop improving your products and processes to out-distance competitors. You want investors to believe that you are a realist, but have the confidence and determination to win.

Investors know that winning in today’s highly competitive environment is more a mindset than a product feature. Competitor bashing is not a skill that you need to hone. I look for entrepreneurs that can sell themselves and their offering to discerning customers. Money from customers and investors is the same color.

Martin Zwilling