These Are The 10 Things That Will Scare Off the Investors

Do You Want to Attract an Investor at The KCB Lions’ Den Show or Shark Tank Shows?
The 10 Things That Will Scare Off Investors for Your Business

10 things that will scare off investors at Lion’s Den or Shark Tank TV showsI am a great fan of the KCB lion’s Den show on NTV Kenya(KTN season 2) and the Shark Tank show aired on ABC in the USA and BBC Worldwide. After having watched several seasons of Shark Tank and season 1 of Lions’ Den plus a bit of some research, I discovered some of the things investors look out for before financing your business venture. I have come up with at least 10 things that will scare off investors at Lions’ Den or Shark Tank TV shows which can apply in any of the following:

  • Banks
  • Personal investors
  • Venture capitalists
  • Angel investors
  • Peer-to-peer lenders

Below are the 10 things that will scare off investors at Lions’ Den or Shark Tank TV shows

  1. Lacking clear focus

In any undertaking on this earth, you must have focus for you to achieve what you have purposed to achieve. On the same note, when presenting your idea to an investor(s), you must come out as one who has a clear focus on what you want to achieve and have a clearly laid down strategy. This gives the potential investor the confidence that you are not on a trial and error trajectory. To overcome this, have a clear written down mission and vision for your business. This will show you clearly know where your business is headed to or wants to achieve.

  1. Lack of a clear and concise business plan

Closely related to the above, not having a business plan is detrimental to your quest for attracting an investor. You must have a plan on how you intend to run your business. A business plan helps you to stay on course and gives you a good projection of how the business will be run especially in its formative stage. A clear business plan will help an investor have a vivid picture of what they are investing in. Make sure you have one to help improve your chances of securing an investor.

  1. Exaggerating market projections

In an attempt to convince an investor commonly known an “kuweka box” literally putting someone in your box to fund you, it’s very tempting to exaggerate things. One of the things many entrepreneurs exaggerate is the market share and superiority of your service and/or product over others in the market which cannot be backed up by real figures. When the lions/sharks realize this, they pull out ‘en masse’ because they feel you are out of touch with how things work. The market trends are very dynamic and can shift within a very short time due to forces that cannot be controlled or even seen. Therefore, it’s important to know that this is not a good tactic to apply.

  1. Unrealistic financial projections

This is also related to the above point on being unrealistic with your market share. Cost and revenue go hand in hand and it’s therefore important to be realistic on these. Don’t exaggerate on the expected revenue or under estimate your cost of doing business on the other hand. This can be detrimental in two ways: one; you may not achieve your revenue targets. Two; you may run out of invested cash without having broken even. Don’t be fooled veteran investors are in a position to check out this and on many occasions, I have seen investors pull out in the Shark Tank show for this reason.

  1. Not acknowledging your competition

Very rare will you come across a business idea or venture that someone else has not yet thought of or tried. Even if that’s the case you can be assured that soon someone else will copy from you and want to put you out of business. You should therefore acknowledge the fact that there is or there will be competition. Most importantly you must show how you intend to deal with competition and stay ahead of the pack.

10 things that will scare off investors at Lion’s Den or Shark Tank TV shows

  1. Lack of clear understanding of your business metrics

How well do you understand your business metrics like cost of producing a single item or in service provision how much will it cost to acquire one customer? Knowing such important metrics from production to reaching the market shows you really understand your business well. If you fail to show that you clearly have a grasp of these important aspects of running your business you will not have a realistic chance of getting an investor to fund you.

  1. Portraying to be a Jack of all trades

Being a know it all is a clear sign of dishonesty and lack of focus. Trying to do everything leads you to achieving nothing because no one has the capability and/or resource to try out everything they dream of. No big company in this world does a dozen things at once but they specialize on a particular niche. Appearing to be a Jack of all trades is a sure way of losing confidence in the investors. They are interested in knowing what exactly is your specialty. This is because specialization leads to efficiency and efficiency leads to perfection. As a result, you will offer high quality services and products which clients prefer over your competitors. This will act as your competitive edge and I can tell you for free investors take pride in being associated with brands that shine. It’s kind of an ego massage for them.

  1. Overemphasis on products and services while ignoring other aspects of your business

For a business to run smoothly and produce the best products and services, there are a lot of aspects that come into play. For that amazing product, you enjoy to use there is a great deal that went into it’s production before it became a finished product. Investors are interested in the how the product is made or service is offered to ensure the right processes was followed. No one wants to face legal penalties and costly fines for fraudulent dealings or harmful ingredients in a product. A good example is the Volkswagen emission scandal where the German automaker paid dearly for cheating on diesel emissions of its vehicles. Volkswagen was ordered to pay a $2.8bn (£2.2bn) criminal penalty in the United States for cheating on diesel emissions tests.

  1. Not having a risk mitigation process

Have you seen how the sharks pull out instantly when they discover that a business idea is too much of a risk? This is because no one is willing to throw away their money. Even charity work is not a risk but a way of investing in your brand image on the community by giving back. No venture/startup is guaranteed to succeed an it’s always a risk-taking business with the hope that you will beat the risks involved. For this reason, you need to have in place some risk mitigation measures to reduce the effects of risks involved. Not having even, a single one is a clear sign that you are not well acquitted with the business environment you are operating in. This will surely drive off any investor no matter how little they are to invest in your venture.

  1. Being greedy

This is a no brainer. Over and over again I have seen entrepreneurs miss out on the much-needed funding and/or support of the sharks/lions because of wanting too much from the investor(s) and can’t explain how exactly they are going to use the money. Other entrepreneurs want to overvalue their investment worth so that they can get more than they really need or willing to part with. A good example is the owners of mdudo.com in season one of Lion’s Den. One thing you ought to know is that these investors have the know how of evaluating a business from it’s face value. Very few times have they been wrong on this. It’s therefore not a wise move to want too much than what you really need. I have however seen investors come out of the session with much more than they initially asked for especially if the lions/sharks see the business as a great investment opportunity and want to fight for it.

Final word on the 10 things that will scare off investors at Lions’ Den or Shark Tank TV Shows

Securing an investor on the Lion’s Den or Shark Tank show is a shot in the arm for your business. If you have a great product or service and able to sell it well to an investor(s) you can be assured you will get the funding.

The 10 things that will scare off investors at Lions’ Den or Shark Tank TV Shows or in any other scenario as discussed above should help you greatly increase your chances of getting the funding you need.

Are you in business and want to get funding for your investment? Look out for press releases on when the applications are open and try your luck. Remember to do a great presentation so that you can attract an investor. You can also register for SME Business Club membership to be included in our pool of entrepreneurs whom we offer linkup with investors and financiers.

To get in touch with us send us an email: smeclub@smeafrica.net or give us a call 020 8048985/6 • 0723 355 408 • 0722 538 270 

 

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