Top 5 Mistakes to Avoid When Funding Your Startup

Seeking startup investment could be a real nail-biter, as our writer knows from personal experience. Here she shares what not to do.

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Humaira Ahmed, CEO of Locelle, pitches at SAAS North in Ottowa. Lochelle is a social health benefit app that can be offered as part of the onboarding package by companies who want to attract and retain top female talent and focus on inclusion and diversity.

Once upon a time, I was a startup founder with a dream to create a socially conscious gaming company that would inspire kids to make the world a better place. Our first game would be a business simulation where kids would create a skateboard company focused on the triple bottom line  — people, planet and profit. I’d find investors who believed in my vision and they would provide the investment to make it happen.

Hard “NOPE” on that one. I did get interest — and I did come close to raising money more than once — but, ultimately, I got nothing. Well, nothing financial anyway. But I did learn some powerful lessons from my mistakes.

Mistake 1: Being Unknown

I spent the first 15 or so years of my career working with film-related organizations and then as the VP/co-owner of a production company. I got to produce, direct, write and even host documentaries that were meaningful to me. When the industry shifted away from documentary to reality TV, I decided to shift too. I moved into the tech sector and reinvented my career. I knew very few people in the industry and had to hustle to establish myself.

As time went on, I did build a team of co-founders and mentors, but I was still relatively unknown, with zero gaming experience.

What I really needed was a champion who was well known in the investment community and willing to put their own money behind me, while encouraging others to do the same. I didn’t have that. Other deals available at the time had players who were better known, with the right champions behind them to lead their round. I had lots of supporters, but few people willing to put their skin in the game.

Mistake 2: Being Overly familiar

I’m a proponent of being authentic and vulnerable. Sometimes, though, “authentically you” might not be the best persona to embody when pitching for investment.

I participated in a pitch competition where I decided to be my unfiltered, completely real self. I thought it would be funny and charming.

Now, that approach can work when you’re pitching one-on-one or to a small group and are able to read the response and adjust as you go. But when you’re pitching to a large panel of investors and funders, it can come off as unprofessional and possibly even disrespectful. These weren’t my friends — they were people seeking a good investment with someone who knew what they were doing. That’s not what I presented to them.

Mistake 3: The Chicken and the Egg

My pitch had a problem — I needed money to create the game, and I needed the game to get the money. But I only had enough money and time for my team to create a simple Minimum Viable Product (MVP). Without a track record in the gaming industry, that wasn’t enough. We were stuck. Without a product or investment it was — wait for it — game over.

Mistake 4: Counting Chickens

Speaking of chickens, I learned this next lesson the hard way: a deal isn’t signed until it’s signed. Don’t assume the money is in the bank until it’s really in the bank.

We had an investor ready to give us “up to 100K.” We had an organization “ready to sign a contract for 150K.” And when the organization backed out due to budget cuts, our investor bailed too. We got nothing but the life lesson.

Mistake 5: I Like You, But I Don’t Love You

My failure to raise the money needed to launch my gaming company was a combination of many things, but there was one major flaw that fundamentally doomed it — frankly, I didn’t give a sh-t about video games.

I cared deeply about social impact, about teaching kids about conscious businesses and all of the incredible learning our game would provide. I just wasn’t a gamer. And if the CEO/founder isn’t passionate about the industry they’re in, then why should anyone else give them money to pursue it?

As entrepreneurs, we need to live and breathe our businesses. Being in love with the potential impact isn’t enough.

The Lessons Continue

There are a lot of variables in raising investment — your industry, your product or service, your stage of business, your team, and so on, so it’s important to do your research and go in prepared.

Failure sucks, but it’s not a true failure if you learn from your mistakes and have the guts to do better as you try again, just as I plan to do this year by seeking to raise investment for a much less niche company that I’m deeply passionate about.

This article is from the February/March 2019 issue of Douglas.