10 Mistakes Entrepreneurs Often

Make When Raising Capital

Andy Cars, CEO
Seedcap AB

2015 Seedcap AB

www.seedcap.se

1. Trying to raise money

too late
Raising money is time consuming!
Count with an absolute minimum of 3 months,
with a more likely scenario being 5 - 7 months.
Preparation
2-4 weeks
7 months

Marketi
ng
2-4 months

2015 Seedcap AB

Negotiati
on

Closing

1-2 months

www.seedcap.se

Total: 3 -

2. Trying to raise money

too early
There should be a logical relationship between
the
perceived value of the company in need of cash
and the amount of cash to be raised.
Trying to raise significant sums simply
based on an idea usually fails.

2015 Seedcap AB

www.seedcap.se

3. Lacking a realistic
assessment
of the companys'
value

Some entrepreneurs are

unaware of what drives value.

They favor fundraising to

building traction in a lean way.

2015 Seedcap AB

www.seedcap.se

4. Not building enough

traction
approaching
1.before
Experiments
and data
investors
2. Immaterial rights / protection
3.
4.
board
5.
6.
7.

Prototype
Team, board of directors and advisory
Strategic partnerships
Customers
External investors

Before approaching investors ask yourself what

you2015
can
do right
now to build
traction.
Seedcap
AB
www.seedcap.se

5. Not splitting the

message into
smaller chunks
Although having a well structured business plan
is often a requirement for obtaining financing,
the importance of creating a variety of pitch
materials
that are tailored to the different stages of the
communication cycle, is often overlooked.

2015 Seedcap AB

www.seedcap.se

5. Not splitting the

message into
smaller chunks
Split the message into smaller chunks to
make it easier for investors to digest it.
The 10 second "elevator pitch"
The "Executive summary" or "Flyer"
The 10 minute slide deck
The business model canvas
2015 Seedcap AB

www.seedcap.se

6. Preparing poor pitch

material
Preparing poor pitch documents that raise more
questions than answers is all too common.

2015 Seedcap AB

www.seedcap.se

6. Preparing poor pitch

material
Ignoring the importance of the team

Most investors choose an a-class team with a

b-class business idea before a b-class team
with an a-class business idea.
2015 Seedcap AB

www.seedcap.se

6. Preparing poor pitch

material
Ignoring your customers
Not talking to potential customers early on
is a very common mistake. A true entrepreneur
will always include the customer in the
development process.
The inventor is usually the person shutting
himself off from the world to develop the
most brilliant product on the planet that in
the end no one wants.
2015 Seedcap AB

www.seedcap.se

6. Preparing poor pitch

material
Ignoring to clearly state how to reach
the market
Simply stating word-of-mouth is not enough
or
Defining future market share as an
imaginary percent of the total market (top-down)
instead of basing it on product offering, budget
and
planned marketing and sales activities (bottomup).
2015 Seedcap AB

www.seedcap.se

6. Preparing poor pitch

material
Ignoring the competition
If there is no competition
there is usually no market.
Look harder!

2015 Seedcap AB

www.seedcap.se

6. Preparing poor pitch

material
Ignoring hidden agendas
Although the product may be great and offer true
value
to the consumer, there may be hidden agendas
preventing the product from catching on.
For example, any product or service that shifts
the power balance within an organization cannot
simply be pitched based on value to the end
consumer.
2015 Seedcap AB

www.seedcap.se

6. Preparing poor pitch

material
Ignoring your strategic partners
Gaining market acceptance and quickly building a
significant user base is usually not possible
without
strategic partnerships.
How much time do you spend on building
your strategic partnerships within manufacturing,
distribution, marketing and sales?
2015 Seedcap AB

www.seedcap.se

6. Preparing poor pitch

material
Ignoring the importance of scalability
What can you do to improve scalability?

2015 Seedcap AB

www.seedcap.se

6. Preparing poor pitch

material
Ignoring the international market
Your local market is usually not large enough.
From day one, start defining your
potential international markets
and how to reach them.

2015 Seedcap AB

www.seedcap.se

6. Preparing poor pitch

material
Ignoring future milestones
Be clear on what your milestones are and
what you need in order to achieve them.
Investors will hold you accountable with regards
to the milestones that you set.
Make sure to make them realistic.

2015 Seedcap AB

www.seedcap.se

6. Preparing poor pitch

material

2015 Seedcap AB

www.seedcap.se

7. Pitching to the wrong

investors
Establish contacts with financiers who have
deep enough pockets so that they can participate
in the next financing round.
Be clear on what type of investors you are looking
for and what you expect from them.
- Investment horizon
- Competence and network
- Cash and time that they can put in
2015 Seedcap AB

www.seedcap.se

8. Not pitching at all

Don't worry excessively about communicating the
value offering to others thinking that they will
"steal the idea".
It is not the idea that is the most important but
the
successful execution and continuous
improvement
of the idea that matters.
Welcome feedback on how to develop your
business idea
2015 Seedcap
AB
www.seedcap.se
and business
model
to make it
even better.

9. Getting too greedy

Getting the right kind of investors onboard can
mean the difference between making it and not
making it at all.
Be prepared to give up around 20% during round
1.
Offering less than 10% is usually pointless.
Offering more than 50% during round 1
probably means that you are looking for
too
much
money too www.seedcap.se
early.
2015
Seedcap
AB

10. Not willing to share

risk
Investors favor those who put
their money where their mouth is.
Entrepreneurs who want "out" by
trying to raise money to pay off
personal loans normally end up
with nothing.
If the entrepreneur shows that
they do not believe in the venture,
why should the investor?
2015 Seedcap AB

www.seedcap.se

Bonus: Passion and

Focus

2015 Seedcap AB

www.seedcap.se

THANK YOU FOR

LISTENING
linkedin.com/in/andy
cars
@andy_cars

2015 Seedcap AB

www.seedcap.se