I frequently work with start-ups. Sometimes as an advisor. Sometimes a supplier. Often, I’m asked to invest or help raise money. As I review pitch decks, I see the same theme repeatedly. Entrepreneurs, in love with their “baby,” focus too much on their product and how it’s going to “Uberfy” an industry. Unfortunately, they missed the critical elements investors target (in order):
- They haven’t found a product-market fit.
- They haven’t formed a team with proven success in that industry
- They don’t have a command of the competitive matrix or their intersection
- They don’t have command of their financials and, more critical, ratios.
Traction trumps team… Team trumps product.
One of the only television shows I watch is Billions, starring Damian Lewis as Bobby Axelrod, on Showtime. In one episode, Axe’s wife, trying to raise a round of funding for her new venture, has negative experiences with potential investors. Axe adroitly explains why she’s not ready:
“What is it you do that you’re the best in the world at? You offer a service you didn’t invent, a formula you didn’t invent, a delivery method you didn’t invent. Nothing about what you do is patentable or a unique user experience. You haven’t identified an isolated market segment, haven’t truly branded your concept. You need me to go on?
So why would an investment bank put serious money into it? I all but told you that ahead of time, but you wouldn’t listen. Now you’ve heard it, but it’s too late. You. Weren’t. Ready.“