VCs say they are always surprised by the number of investors who seem oblivious to the mistakes that can tip the decision to invest or not to invest.

Lack of personal risk

Do not expect others to put money in your business if you don’t put any money in yourself. You need “skin in the game” or else investors sense you could bail out and get a job at Google when the going gets tough – which it inevitably does.

Poor presentation of financial information

Another big mistake is handing over a spreadsheet with every item listed, including stationary and envelopes. You do not need to provide that information to the investors. If they ask, you can pull out your details but they do not need to see every line of the P & L otherwise they may end up banging their heads on the table. Moreover, the investors will want their information quarterly, no matter when your year-end falls –give it to them based on the common tax schedule.

Not knowing the fund

You’re not the only ones trying to ‘spin.’ VCs spin just as much and they want you to take a big chance on them too. It’s a quiet little secret that fund managers and VCs want to be known and admired too. If you take the trouble to research them, it demonstrates that you are genuinely excited about them coming on board. By now, you recognize there are as many varieties of funds as animals in a zoo: Labour funds, L.P.s, strategic finance funds versus venture equity and focused on industry. Do your research. Who have they backed before and what do you have in common with those companies?

Ask the other entrepreneurs running companies in the portfolio, “What did your VC do for you lately?”
Is this fund patient? You want to be comfortable that they are not going to do a quick flip of your business but rather, that they care about your vision.
Will the fund be there for the next round of financing?
Do they have a network of contacts?
What is the reputation of the VC, because when you go for your next round of money (as you grow), the next investors will want to know who went in the first time? If your investors are headquartered in Las Vegas and resemble the cast of The Sopranos, maybe take a pass. If you choose to take the easy route and get your business financed by some heavy in the ‘waste disposal’ business who wears big knuckle rings, know that this short cut will one day be brought out into the harsh light of day and may cost you blue chip funding years down the road.

Lack of standing in the community

You are going to very few private investors and you are selling an extremely expensive item. Put yourself in your investor’s shoes. This person is spending $1 to $5 million of his own money on your company. Is he going to hand over cash to someone who calls up and says, “Hey Joe, I hear you’ve got some extra money kicking around and I have a terrific company for you.” Absolutely not. The investment community is like six degrees of separation and they will find out everything about you.

Jan Carlezon, CEO of a failing Scandinavian airline, turned it around by teaching his employees that each of them counts in the customer experience. When travellers receive a smile at the check-in counter, when they sit on a spotless seat, when they reach for a clean blanket - each of these little elements is a moment of truth, a moment when the brand is reinforced. Imagine if the washroom were dirty. That moment of truth would tarnish the other positive parts of the customers’ experience. The customers would feel that your maintenance of the aircraft was shoddy, that your whole business was like that one carelessly kept washroom. Attracting investors is about each and every experience the investor has with you - from conversations to setting up the meeting, to the paper you use for your investment proposal. It’s all providing a message about how you operate your business.

If you write a blog or chat in Facebook, know that your friends are not the only people reading your words of wisdom. Do not divulge details about your private equity partners, “These VC bozos made me write a sixty-page plan they didn’t even read.” Rick Segal of JLA Albright, obviously a well read VC, blogged about this entrepreneur’s blog gaff on his blog!

If you have something difficult in your background – a lawsuit, for example – be upfront. As Dr. House in the Emmy winning TV Series, House, says, “Everyone lies.” A fund manager who had just won a top businessman of the year award said, “Being a cynic and never believing in anyone these past twenty years finally paid off.” Google makes it easy enough for a monkey to do a surface background check and fund managers have lawyers to do more detailed sweeps. In 110 B.C., Publilius Syrus wrote “A good reputation is more valuable than money.”

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