They approach VCs without a compelling story
It starts early, when pitching VCs, says Christian Nagel, co-founder of Earlybird, an international venture capital firm in Germany. “Many of the approaches are not very powerful and we get all kinds of stuff without reflecting on what we do.”
It is not uncommon for inexperienced founders to approach venture capitalists in an unprofessional manner, without even testing if their story resonates.
If a founder receives positive feedback after approaching a VC, they may be in a good position to raise money, Nagel continues. If the feedback isn’t good? Work on the story and the business model, he advises.
Nagel, who has worked with startup founders for 19 years, also suggests maintaining contact and keeping investors up-to-date. Not just approaching them for the purpose of fundraising.
They fail to set appropriate goals
“In many cases, I see people who think they are fine after receiving funding.”
“It is not just funding and we are done,” Nagel shares. “It is just the first of many steps you need to take.”
Founders need to set appropriate goals and agree on short-term plans, especially in terms of the immediate steps taken after securing funding.
“There is always something to do, but it is about prioritisation,” Nagel explains.
They lose focus
Before investing, Nagel looks at a founder’s ability to focus and whether they have too many applications in mind.
It makes no sense to invest if the business is unfocused, Nagel says. But once VCs are in they will help the team focus on one concept and set priorities.
“It is also our task to focus the entrepreneurs,” Nagel says. “This is what the board is for: to act, discuss and decide whether it makes sense to work on one, two or three different areas.”
They don’t hire the right people
Entrepreneurs are usually good at one or two things, but it is rare that they can do everything. To make up for the skills they lack, Nagel advises entrepreneurs to hire people who are better than themselves. And trusting them to take the lead.
This is especially important with such small teams in the beginning: “It is really about hiring people that are better, in order to build a good team.”