3 Red Flags that Say "Don't Fund Me" to VCs

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3 Red Flags That Say "Don't Fund Me" to VCs

When you’re raising capital for your startup, you’ve spent hours and hours trying to build relationships, craft a compelling story, and get that check. But there are a few things that will kill your deal in an instant.

Why do founders fall into these pitfalls?

• They don’t realize they’re red flags.

• They’re operating from a place of fear.

• They don't realize how easy they are to avoid.

But don’t worry. I’ve got you, and you’ve got this! You can avoid these red flags to put your best foot forward as you fundraise.

Red Flag 1: Inflating your Metrics

You may think you’re being strategic when you’re cherry-picking favorable data points, but VCs can see right through vanity metrics. You grew your customer base 10x, and you’re highlighting that everywhere in your pitch. That sounds impressive, and I’m intrigued. But when an investor digs in and discovers that the 10x increase was actually scaling from 1 to 10 low-paying customers, questions pile on and the trust erodes. That makes investors spiral. What else was an exaggerated data point?

You’re a growing startup. Not every metric will be perfect, and that’s okay. Be honest about your traction and KPIs, and acknowledge your strengths and opportunities for growth.

Red Flag 2: Not Acknowledging the Competition

Here’s the thing, there is always competition. Even if there are no close direct competitors, your competition is time and money. How else do your customers spend those?

If you’re building in a hot industry, there’s a big chance that the investor you're pitching has heard 10 other pitches exactly like yours. The ideas aren’t novel, the execution is. Something about your startup’s execution is innovative, and that’s your differentiation. Maybe it’s your approach to the problem, maybe it’s your technology, maybe it’s your team’s expertise and relationships. Figure out why you’re unique, and focus on why that will make you win.

Red Flag 3: Inflating your Metrics  

Startups inevitably face challenges and setbacks along their journey. Founders who avoid discussing the hard times during fundraising can raise doubts about their integrity, resilience, adaptability, and ability to navigate future obstacles. Hard times aren’t a weakness. They’re an opportunity, and you should want investors who will support you in the good times and the bad.

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Final Thoughts

Don't inflate your metrics. Don't say you have no competition. Don't pretend things are perfect.

Thanks for reading, until next week!

Caroline

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