Things That Make You Go Hmmm...

I was at the crib
Sittin' by the fireplace
Drinkin' cocoa on the bear skin rug
Gmail rang - who could it be?
Looked at the deck then started to shrug

There are a lot of hidden “traps” that founders can fall into when fundraising. There are phrases that come across differently to founders and VCs, missteps that can lose you credibility with potential investors and phrases that immediately tell an American VC that you’re “not from around these parts.”

And then, there are the things that make investors go “hmmm…”.

These are things that won’t outright kill a fundraise, but can cause enough potential investors to pause that they can meaningfully hurt your fundraising funnel. They can cause VCs to turn down introductions they might otherwise have taken, to slow down their diligence process, or to archive your intro email intending to revisit it…but never doing so.

Here are 5 things that make VCs go hmmm…

1. A founding team with no connection to the industry

One of the most significant questions for investors is “why are you the one to solve this problem?” That isn’t just a question about capabilities, but also one of motivation. Why are you doing this? Why will you commit to spending the next 7-10 years on this problem above all else?

Often the answer is obvious (e.g. from reading the founding teams bios). In other cases, the framing of the problem tells the story (“for the last 10 years, I was frustrated by X…”). But if nothing in the deck links the founding team to the industry in which the problem exists, it can cause investors to go hmmm…

2. Founders who aren’t full-time

When one or more founders aren’t full-time, it almost always causes investors to go hmmm…

To be clear, I’m not talking about situations where founders legitimately don’t have the financial resources to go full-time. I’m talking about cases where one or more key founders with (apparent) resources are hedging their bets.

A non-technical CEO with a CTO who will join “as soon as the money is raised?” Three well-paid cofounders who are “looking forward to going full-time” once the money’s in the bank? Building startups is hard (really hard) and you’re going to have a tough time convincing potential investors to buy-in if your entire founding team hasn’t.

3. No screenshots

Many founders get carried away with pitch deck design. It’s easy to spend so much time trying to make the deck look perfect that you forget to include screenshots of the actual product.

Here’s the thing: if I read a pitch deck start to finish and don’t see a single image of what you’re selling, I assume that it doesn’t exist. My conclusion (right or wrong) is that your product is still a figment of your imagination and that no human being has actually seen it, much less used it.

4. No numbers

A common misconception amongst founders is that it’s possible to fundraise off of nothing other than a “vision.” The myth of the “back-of-the-napkin” fundraise continues to permeate, despite the fact that it’s little more than an urban legend.

No matter how early your company is, it’s essential that there are hard numbers in your pitch deck. If you have 100 beta users, what are some statistics you can show about how they’ve been using the product and what you’ve learned from them? If you’ve made $1,000 in revenue, what are some of the way-too-early metrics around it? Sign up stats, retention rates, unit economics…all of these are fair game to include in a pitch deck, even at a very early stage.

Why?

Because it shows that you’re building something real and that you’re paying attention to what matters.

No numbers in a deck? That definitely makes investors go hmmm…

5. A screwed up cap table

Unfortunately, this is one that hurts a lot of first-time founders.

When investors come across a screwed up cap table (that is, one in which the founding team owns far less of the company than they typically should at a given stage), it definitely makes them go hmmm…

There are a variety of reasons why a cap table can end up “upside down,” but most often it comes down to to angel investors, venture studios and other early investors who believe they should own far more of the company than they have any legitimate right to (at least, if they hope that the company will attract new investors). VCs are genuinely concerned about founder motivation over time — if the founders don’t own enough of the company, are they going to stick around in 5 or 7 years when things get really, really tough?

For a Pre-Seed / Seed VC like me, the question I ask myself when I see a messed up cap table is: do I want to put in hours upon hours of work to help this founder fix it?

And honestly…a lot of the time I don’t.

So remember…try not to give investors unnecessary reasons to go “hmmm…”.