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10 Mistakes Entrepreneurs Often Make When Raising Capital

Andy Cars, CEOSeedcap AB

2015 Seedcap ABwww.seedcap.se1Raising money is time consuming!

Count with an absolute minimum of 3 months, with a more likely scenario being 5 - 7 months.

1. Trying to raise money too late

2-4 weeks 2-4 months 1-2 months Total: 3 - 7 months2015 Seedcap ABwww.seedcap.se2There 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.

2. Trying to raise money too early

2015 Seedcap ABwww.seedcap.se3Some entrepreneurs are unaware of what drives value.

They favor fundraising tobuilding traction in a lean way.

3. Lacking a realistic assessment of the companys' value

2015 Seedcap ABwww.seedcap.se41. Experiments and data 2. Immaterial rights / protection3. Prototype4. Team, board of directors and advisory board5. Strategic partnerships6. Customers7. External investorsBefore approaching investors ask yourself what you can do right now to build traction.4. Not building enough traction before approaching investors

2015 Seedcap ABwww.seedcap.se5Although 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.5. Not splitting the message into smaller chunks

2015 Seedcap ABwww.seedcap.se6Split 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 canvas5. Not splitting the message into smaller chunks

2015 Seedcap ABwww.seedcap.se7Preparing poor pitch documents that raise more questions than answers is all too common. 6. Preparing poor pitch material

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Most investors choose an a-class team with a b-class business idea before a b-class team with an a-class business idea.6. Preparing poor pitch material

Ignoring the importance of the team2015 Seedcap ABwww.seedcap.se9Ignoring 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.6. Preparing poor pitch material

2015 Seedcap ABwww.seedcap.se10Ignoring to clearly state how to reach the market

Simply stating word-of-mouth is not enough orDefining 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 (bottom-up).6. Preparing poor pitch material

2015 Seedcap ABwww.seedcap.se11Ignoring the competition

If there is no competition there is usually no market.

Look harder!

6. Preparing poor pitch material

2015 Seedcap ABwww.seedcap.se12Ignoring 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.

6. Preparing poor pitch material

2015 Seedcap ABwww.seedcap.se13Ignoring 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?

6. Preparing poor pitch material

2015 Seedcap ABwww.seedcap.se146. Preparing poor pitch material

Ignoring the importance of scalability

What can you do to improve scalability?2015 Seedcap ABwww.seedcap.se15Ignoring the international market

Your local market is usually not large enough.

From day one, start defining yourpotential international marketsand how to reach them.6. Preparing poor pitch material

2015 Seedcap ABwww.seedcap.se16Ignoring 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. 6. Preparing poor pitch material

2015 Seedcap ABwww.seedcap.se176. Preparing poor pitch material

2015 Seedcap ABwww.seedcap.se187. 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 in2015 Seedcap ABwww.seedcap.se198. 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 and business model to make it even better.

Be open to forming strategic partnerships.

2015 Seedcap ABwww.seedcap.se209. 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 early.

2015 Seedcap ABwww.seedcap.se2110. 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 ABwww.seedcap.se

22Bonus: Passion and Focus

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2015 Seedcap ABwww.seedcap.se

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