Why an Investor Might Hate Your Idea

By Josh Linkner, Forbes Contributor
Blogger Comment by David Repka

Having witnessed thousands of entrepreneurial pitches as a venture capitalist, I’ve seen the gamut from the good, the bad and the ugly. Of the pitches any VC sees, very few will actually receive funding; there are a lot of factors in that equation, so even for those companies that might be appealing, terms, location, market share, traction and other hurdles sometimes get in the way of signing a check. However, you’ve got no shot at funding if your potential venture capitalist flat-out hates your idea. If your “next great” idea has any of the following characteristics, there’s a solid chance a VC isn’t going to dig it. 

Copycat: Groupon for pet owners isn’t going to give me that warm fuzzy feeling. Neither is Zaarly for furniture craftsmen. The world doesn’t need another “me too” anything, and your venture capitalist should be the first to tell you as such. Ultimately execution is worshipped, but first, innovation is rewarded.
[BLOGGER COMMENT: Do you remember the scene in Something About Mary when the Hitchhiker had the great idea of 7-Minute Abs when televisions across America were lit up with commercials for 8-Minute Abs? When Ted suggests 6-Minute Abs the Hitchhiker develops a facial tick. Entrepreneurs need to bring more to the party than knocking a minute off 8-Minute Abs and thinking that will be the difference maker to attract an investor to your venture. Watch the 1:47 scene from the movie here.]

“Vitamin”: At 2:00 am with a throbbing migraine, many consumers would trudge out to the pharmacy to get pain medication – anything to ease the pain. Yet nobody in their right mind would head out to the store at that hour to get vitamins. Your idea should provide the same help: if you’ve got a “vitamin” idea, it’s an added convenience, but doesn’t solve a true real-world consumer pain – and won’t develop a following.

Vague: If you can’t sum up your product’s main features in one clear sentence, then your product isn’t explicitly defined. Simplicity is a beautiful thing: pick something specific and hit it out of the park. Don’t try doing too much across too many platforms, or you’ll risk being C-level at everything.
[BLOGGER COMMENT: In the words of Leonardo da Vinci, “Simplicity is the ultimate sophistication.” I would rather see a 1-3 page well written executive summary that tells a compelling story or 10-page, graphics rich PowerPoint than 20 megs of meaningless data in 40 random, unnamed files any day. Get me engaged. Capture my imagination. Make it easy for me to understand your deal. Get your submission to float above all the chaos in my e-mail and the papers sitting on my desk because of its simplicity and elegance.]

Weak Gameplan: Your pro-formas and business plan should give a clearly defined, specific course of action with step-by-step milestones and goals. Being light on details is a red flag for a VC, because she’ll want to know where you’re headed in the next ninety days, one year, and five years. If you can’t clearly articulate what you’ll be putting the VC money toward, why should a VC give it to you?
[BLOGGER COMMENT: Make your numbers fit on one piece of paper. If I need to flip through 10 pages, you lost me and I will move on to another deal that is easier to get my head around. There is a time and a place for all the fine points. In a first cut of your pitch I want to understand the basic revenues and margins, not how many pool towels you will buy over the next year.] 

The ideas I get excited about might not be the same as the ones exciting another VC out there – that’s why there’s a variety of firms, and a ton of hopeful startups; something for everyone. However, any smart venture capitalist would agree that she’d be most excited by an innovative, unique, straight-forward company that has all its ducks in a row, solves a real consumer pain, and is run by a rockstar group of entrepreneurs.  Hey, I wouldn’t hate that either.

[BLOGGER COMMENT: With the ability to earn interest income from Bonds and CDs at an all-time low more and more investors are looking at investing in operating businesses and commercial real estate to earn an acceptable income. The above guidelines are just some of the distinctions to consider when allocating capital.]

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