Here’s a riddle: What takes a tenth of a second to occur and can make or break your startup? No, it’s not the computation performed by your tech product’s proprietary algorithm. It’s a first impression, and the Princeton researchers who discovered how quickly we form them also found that our first impressions don’t change much after getting to know somebody for longer.
So while you really need to nail your whole pitch, your fate might be sealed within a few short moments of first meeting with an investor. Indeed, if there’s any group whose job it is to suss out strangers’ trustworthiness quickly and meticulously, it’s venture capitalists. That’s certainly not to say they always get it right, of course, but the fact remains that you’ll need to avoid those first-meeting turnoffs if you’re going to succeed.
According to five VCs, these are a few of the most cringeworthy ways founders tend to screw up right out of the gates–what it takes to avoid that.
Using names of investors who are “almost certainly in the deal” is a big red flag, says Ewa A. Treitz, a venture partner at Black Pearls VC who focuses mainly on early-stage tech startups in Central Europe. This kind of information is very easily verifiable with my peers,” Treitz points out, “and if untrue, the deal is off the table.”
But even when it’s entirely accurate, name-dropping can start things off on the wrong foot. “It also says a lot about the founders’ confidence in their business,” she adds. Relying on “outside confirmation as opposed to their own conviction is a dangerous strategy, never played by the winning teams.”
“A huge turnoff is when founders come to us with a totally overblown estimate that doesn’t reflect their corner of the universe,” says Brad Svrluga, cofounder and general partner at Primary Venture Partners.
He explains, “One vertical SaaS company selling into health care providers came to us and quoted their market size as total health care IT spend. This couldn’t have been farther from the truth. The administrative software they were pitching only touches a fraction of that market, and their numbers certainly shouldn’t reflect the countless other portions of HIT spending–like CT imaging software, supply-chain management software, patient-portal technology, etc.–that have nothing to do with their product.”
VCs are especially attuned to identifying off-base estimates like these, says Svrluga. “When determining market potential, founders should be 100% focused on their specific product. Lumping in everything else from a particular industry will only raise questions and distract potential investors from what’s really relevant to their business.”
Nisa Amoils, a partner at Scout Ventures, has seen market misses as well. She adds, “A founder needs to show a bottom-up analysis based on sales projections. This is more realistic than only providing [a] top-down claim where you say you will get X percent of the total market size, which is always huge in every pitch. Your total addressable market should be arrived at by estimating both carefully.”
Subtle Signs Of Character Flaws
“If there is one validating factor–assuming we already like the business in the pitch, of course–it is the level of ethics/conduct we get from the entrepreneur at the very first meeting,” says Jonathan Tower, general partner at Catapult VC. Tower asks himself one question of every founder he meets: “Would I have complete confidence in the entrepreneur exercising good judgment with key relationships that the firm has?”
“If I get a whiff from the first meeting that the entrepreneur is not on the level, is being cagey, fudging too many important details, is being condescending to younger staff or gatekeepers, is playing power games–these are all quick no-gos.” Tower adds, “Character cannot be taught, and these tendencies are apt to show up again and again if we work with that entrepreneur. Frankly, life is too short.”
Tone-Deaf Or Insensitive Language
It’s no secret that the tech sector in general and the VC world in particular have serious diversity problems, and that those demographics have contributed to a spate of scandals in Silicon Valley over the past year. While there are important efforts underway to change things, some VCs have learned to weed out bias simply in the ways they’re spoken to by founders.
“Words matter, and the language people use reflect the type of founder they are and the type of company they are going to build,” says Chang Xu, an associate at Upfront Ventures. She recalls one uniquely egregious example. “I had an entrepreneur say that he’ll ‘open the kimono’ with me. As I’ve learned, this is a term used in finance to mean sharing the inner workings of the company. However, it’s wildly inappropriate.”
Xu couldn’t be more right. In fact, when Fast Company assembled a bracket of 32 examples of awful business jargon (including “synergy”, “touch base,” and “move the needle”), readers voted “opening the kimono” as the absolute worst. (It was ceremonially destroyed in the form of a piñata in August 2015.) As Xu describes the offensive encounter, “I look at the entrepreneur wondering if they have ever pitched to a female VC, or better yet, an Asian female VC, and realize the irony,” she recalls.
“Next time I hear the term, I’ll respond with, ‘sure, drop your trousers.'”