10/02/23 | Founders, Funding

Four common mistakes founders make during the VC fundraising process

Securing VC funding is not a guaranteed path to success and founders often make common mistakes that can hinder your fundraising efforts.

Here are the big ones I’ve seen in my decade of investing in early-stage companies, and a few suggestions on how to avoid them.

Putting your eggs into one investor basket

Many founders rely on just one or two investors to come in and lead their round or to write a big check. Like most things, you need to diversify who you’re targeting. You can’t assume the investor is an investor until the money hits the bank account. I’ve seen many times where the founder made plans assuming the investor was going to invest only to find out they pulled out at the last minute.

Solution: Founders need to have multiple investors lined up to invest and should assume not all will follow through. Have a plan B and a plan C just in case!

Not showing me the money

Founders sometimes approach investors with just an idea or prototype. I’ve also seen founders who’ve built a product/service but don’t have any real traction or measurable metrics. VCs want to see your company gain traction and generate revenue.

Solution: Develop a minimum viable product (MVP) and gather data on user engagement, conversion rates, and revenue. Demonstrating meaningful traction and measurable key performance indicators (KPIs) will make your pitch more compelling.

Unrealistic valuation expectations

Founders usually have overly optimistic valuations for their startups, which can be a major turn-off for investors. Setting a valuation that’s too high can make it difficult to secure funding, as it may not align with market realities, especially in this current environment. The days of lofty valuations are over.

Solution: Be realistic about your startup’s valuation. Consider market comps, industry standards, and your company’s current stage. A reasonable valuation increases your chances of attracting investors.

Overlooking the importance of networking

This is a relationship business and it is not just about having a great idea. I know it may be difficult if you live in a region that doesn’t have many investors or you don’t have access to an investor network. You have to be creative! Building connections with investors and other entrepreneurs can open doors to funding opportunities.

Solution: Attend industry events (many are still virtual), join startup incubators and accelerators, and actively engage with potential investors. Networking can help you access not only capital but also valuable advice and mentorship.

This piece originally appeared on LinkedIn, and was published here with permission.

Lorine Pendleton

Lorine Pendleton

Lorine Pendleton is a seasoned business development executive and attorney with extensive experience in the legal, technology and entertainment industries. She was recently named by Marie Claire as one of the “Most 50 Connected Women in America,” and Crunchbase as “39 Black Women Investors Inspiring a New Generation of Investors”. She is the NY Chair at TIGER 21, as well as an active angel investor who invests in and advises women and diverse-led companies. She is on the Board of Directors of the Angel Capital Association (ACA) and ACA’s first African-American board member in its history. She is also an alumna and member of Pipeline Angels as well as a guest judge on BET/Centric TV’s breakout series Queen Boss, a pitch competition show where African-American female entrepreneurs competed for a grand prize to fund their businesses. Lorine is a graduate of Brown University (B.A. Economics), New York Law School (JD), Kauffman Foundation FastTrac New Ventures Entrepreneurship (Graduate Certificate) and Lean Startup Machine.

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