This article was published on October 22, 2015

Why investors reject pitches: It’s not always about the market and your product

Why investors reject pitches: It’s not always about the market and your product
Ben Woods
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Ben Woods

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Ben is a technology journalist with a specialism in mobile devices and a geeky love of mobile spectrum issues. Ben used to be a professional Ben is a technology journalist with a specialism in mobile devices and a geeky love of mobile spectrum issues. Ben used to be a professional online poker player. You can contact him via Twitter or on Google+.

Naturally, when an investor is considering taking a stake in a fledgling company, the question somewhere near the top of the pile is how much money does the business need and what is the expected return?

That’s not the end of the story though. Sure, you can worry about burn rate, user numbers and everything else – and you will – but there are other reasons that investors base their decisions on. Here are just a few of them.


Yes, everyone knows you need an ‘elevator pitch’ for your company, but you also need a genuine desire and excitement about the product, and your hopes to bring it to market. If investors are continually unimpressed, you should probably start worrying about how useful your product really is.

Jonathan Struhl, a partner at Indicator Ventures says:

“There have been cases when I’ve passed on investing in a business simply due to the lack of excitement and passion conveyed by the founder. An entrepreneur must tell a great story and inspire investors, especially in the early stages when the product does not yet speak for itself. If investors don’t buy into your mission, your potential customers will likely feel the same way.”

And if you don’t have a fully airtight business plan and burning passion and you’re looking for cash, then you really already need to be a proven success, according to Struhl.

“I’ve had cases when a veteran entrepreneur who is a leading expert in a specific industry is raising money off of a ‘back of the napkin’ idea. In this case, the entrepreneur must know that industry better than almost anyone, the idea must be solving a major pain point they personally have and their track record must speak for itself. It’s rare when all the stars align, but it’s beautiful when it happens!”

Image credit: Shutterstock
Credit: Shutterstock


This is a big one – does the founder know the market inside out? Do they have the ability, desire and perseverance required to drive a startup forward, through good times and bad?

“We won’t invest in teams where the CEO lacks the experience or ability to perform and execute on the vision,” Mor Assia, a founding partner at iAngels, says. “An idea is great and having a product is even better, but going to market, growing the business, and building a company to last, is a different story. New employees are hired after gruelling assessments and evaluations. Unfortunately many investors do not do the same when considering investing in a specific team.”

Arnaud Laurent, founding partner of XLR Capital says that he often looks for determination in other parts of a founder’s life, to get an indication of how they handle pressure. However, it’s not all about ‘drive and ambition,’ you need to be a personable  – and realistic – sort too.

“We’ve met too many startup [founders] who take themselves too seriously. We like to deal with people who are able to talk about their business with humility and humor.

[We’ve met] founders who would not leave their job until they had raised enough money to pay themselves well. It’s not our definition of ‘entrepreneurs’.”

Depending on whether it’s an angel investor or huge late-stage fund, there will likely be different priorities too. Rodrigo Mallo Leiva, an angel investor from South America, gives a lot of weight to his gut instinct based on the team:

“Can I spend a whole weekend with them? I like to spend a lot of time trying to help out in any company I invest in. I strongly believe in team work, and even though I always look for balanced teams, I tend to invest only if I like them all. Talent is great, but teams win championships. Most of all, I focus on egos. Can they put a client’s or even the company’s interest before their own? It’s hard to know so early into the game, but this is a deal breaker for me.

I tend to make many mistakes analyzing companies but I try to make this my golden rule.”

The team really does seem to be the biggest factor for a lot of investors, and rightly so – they’re not just investing in this launch, they’re investing in the ones that follow too. Wayne Gibbins, Vice President at Notion Capital, says that leaders need a delicate balance of attributes to succeed.

“People are key. The team and primarily the founders from an investor perspective. Can they corral investors, get people to buy in to their vision, attract top talent, convince those early adopters and strategic partners to get on board? Do they have that killer instinct to go after the big vision and the operational prowess to do it step by step, carefully sequenced or more likely rapidly iterated until they find the fit?

Can they be both confident, strong leaders, drive the business but also listen, take on board feedback from the market, from their customers, from their team and from their investors? It’s a certain type of DNA, both individual and baked in to the core team. It’s as much an art as it is a science.”

Alexandre Barbosa, Managing Partner at Faber Ventures says that one of the most important factors is a founder who stands out and “has strong references from your and others’ networks and you show credibility that you’ll build a rockstar team and attract top talent that will scale the company into a category leader.”

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Expertise – yours and theirs

When you’re an expert in an area, you clearly have more to offer a startup in terms of guidance and knowledge than an investor who is completely green to a particular sector. That’s not to say that some investors won’t still pour money into businesses they know nothing about, but neither the investor nor the startup is making the most of the opportunity in that situation.

Struhl from Indicator Ventures says he often passes on deals because of his own lack of knowledge:

“You can’t be an expert in every industry. There are times when I’ve seen great deals that are in industries foreign to me. I will often pass quickly because I don’t have the bandwidth to learn a new industry and there might be very little value we can add.”

And even if an investor doesn’t have specific knowledge of that area, they still need to be interested in it and keen to get involved, Leiva told me:

“Can I spend an hour talking about it? Would I be bored at a conference about the company’s industry? As an angel investor you know you need to help spread the word about the company almost as constantly as the founders. I believe you need to be involved to really add value to your cash investment. If I don’t like the industry or can’t picture myself talking about the company over dinner, I know it won’t work for me.

Maybe I don’t quite understand it, or I can’t determine how disruptive it could be, but I need to ‘buy’ it in the first two minutes into the pitch. It’s almost impossible to be analytical about an investment at an angel level, its 99 percent instinct and emotion. I look for the ‘wow’ factor. If I ‘buy it’, I’m in before the third slide.”

And the things founders should never say…

It’s unlikely that if a founder satisfies all the requirements above, that they’d ever fall foul of saying any of the following things, but Ben Wiener,  Managing Partner at Jumpspeed Ventures has heard them all, and described each as “the last words I heard before my brain said ‘pass’.” 

  • “Sorry – what’s TechCrunch?” [That’s the sort of loyalty to The Next Web that we’re always pleased to see though]
  • “Competition? Well, we don’t have any competition.”
  • “We’ve worked really hard and we’ve got everything figured out.”
  • “I’ll answer that question in a few minutes, let me just get through these next two slides”
  • “Since I started looking into this space three weeks ago I’ve gotten really into it”

If you’ve got your own investment tales, from either side of the fence, you can add it in the comments below, or drop me a line at [email protected]

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