5 Common Mistakes Start-ups Make with An Investor

Finance Guru is here to beware you from the common mistakes start-ups make with an investor. These precautions can prove important in making your start-up successful.

Ladies and gentlemen boys and girls welcome back to finance tube i am your finance guru al tucker and we continue the series of question and answers today so we have in our studios tina’s here today welcome to nasa hi how are you great tell me the first time so i want to know what are the common we don’t want to make any room key mistakes so i won’t missteps

That you know people who are funding for the first time meaning okay great why don’t you have a seat we will explain that to you today okay so let’s understand what are the five common mistakes that the first time entrepreneurs do when they approach the investors or so-called theses first mistake is cold calling if you do not know the investor or vc fund don’t

Try to make a cold call or a cold email it’s always better to go through a firm introduction what do you mean by a warm introduction you can ask maybe a person who is already funded by the same vc or an accountant or a lawyer who are in regular touch with these vc guys it’s very essential to get a warm introduction from a middle man or a middle woman who these vc

Guys know and trust the second common mistake that the entrepreneurs do is not doing proper homework it is very essential to find out what is the venture capital doing which space or industry they are looking at what is their investment track record with geographies they are looking at what is their sweet spot and much more it is very important to do the homework


Before approaching the vc because the perception that the vc will have of you will be very different if you have done a proper research on them you are more likely to get funded the third common mistake that most entrepreneurs – when they are talking to vcs is asking them to sign an nda that’s a non-disclosure agreement let’s face it guys it’s not gonna happen why

Simply because the vcs are talking to entrepreneurs day in and day out and they get so many business plans and business ideas that the last thing they want one in their life is to get sued for funding a business idea which is similar to yours moreover for them an nda means consulting a lawyer framing clauses which according to them is waste of time and money so if

You are really worried about the new technology that you’ve invented or the secret sauce of your business then don’t share it with the vc in the first place but if you are expecting to sign an nda that’s just not going to happen the fourth common mistake that most startups do is that they focus too much on valuation now of course pre-money valuation or pre as we

Call it is a very important number however so many startups are obsessed about the pre-money valuation of their company that they almost prefer signing that term sheet which gives them the highest free money now this is a mistake which you don’t realize simply because there are two key factors which affects when you sign on the highest free number one it affects


The option pool and the liquidation preference and number two if there is a bigger p willing to give you a lower pre in that case what you end up doing is you end up taking a huge piece of a small pie whereas you would have been much better off taking a smaller piece of a bigger pie because when you go for your next the funding a well-known pe can give you much

More leverage and valuation at that point in time rather than today the fifth common mistake that most startups do is negotiation very early on they start negotiating term sheets with the venture capitalists without either completely understanding them or hiring a proper investment banker or a counsel could explain them how the term sheets are made see it is very

Important to understand that these vcs spend their entire lifetime creating term sheets so they are more equipped and aware about the every clause and its implication that they have mentioned in the term sheet so it is very important first to understand what kind of terms they’ve offered in the term sheet and hire a good counsel or a banker who could help you to

Do preliminary negotiations on your behalf on the term sheets so friends these are some common mistakes that entrepreneurs do before they enter into an agreement with vcs if you do these mistakes it’s a very slim chance that you will get good amount of funding or even vcs might not look at you so let us recap the five common mistakes that we discussed today are

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Number one cold call number two homework number three nda number four valuations and number five negotiations try and avoid these five mistakes all the best for your funding guys to avoid such mistakes and get your companies funded make sure you are hooked on to our channel subscribe now financed you home loan is the cheapest flow that you can take on this planet

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5 Common Mistakes Start-ups Make with An Investor By Finance Tube

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