Nikki Blog

Like every start up business, MeetNLunch went through the process of raising capital from outside investors. For any business in that position, these investors may be venture capitalists, NGOs, government entities, or any of the three F’s: family, friends, and fools. Everyone you approach asking for money will be looking for reasons not to do the deal because everything naturally sounds impossible before it works. This is how MeetNLunch got started – doing what people thought would be impossible in Thailand, providing a professional dating service for educated Thais to meet other like-minded people.

Today I would like to discuss the top eight things not to say when raising capital. Of course with any start up the entrepreneur believes they are bringing investors something new. I’m certain that I was not the first person in Thailand to come up with the concept of a personalized matchmaking service for professionals. However, I was able to think the process through thoroughly and bring it from fruition. Assuming that you have done your market research, and have a team of people ready to work with you, how then do you raise capital to fund the company and without looking ridiculous in front of the investors? This was the dilemma I faced when I went through the capital raising process.

Investors are tired of hearing the same old stories, so from my experience I advise people in this situation to steer away from saying the following top eight things when raising capital.

1. “Our forecast is conservative” Not only is our sales projection on the low side, but we will be quadrupling the revenue by the second year. The growth will be unprecedented, and frankly I have no clue how realistic my forecast is until I have your money and sale the service!

   Investors know that you are picking a number out of the thin air, something which is high enough to grab their interest, but low enough to sound not unrealistic.

2. “Several investors are lined up”If you don’t hurry, other investors will beat you to it and invest with us, and you will miss out on this great investment opportunity! This will spur only irritation among the investors. In reality, they are thinking, “you have pitched the products to a few investors and none of them have got round to rejecting you yet!”
3. “The market leader is too big and slow to cause a threat”Don’t think that such a statement will make investors believe that you have a competitive advantage and can defeat a well-established competitor. After all, they are the leader for a reason. In general, this will only show how naïve you are to be thinking that you can win over entrenched players. Instead, build on your comparative advantages such as operating under the radar of competitors, addressing the untapped niche or partnering with the competitors.
4. “All we have to get is 1% of the Chinese market”This is a well-known statement that if you are successful in getting 1% in the Chinese market, you will be more successful than any other company in the history of mankind. I once had a dream of franchising MeetNLunch in China, but the flaw in this is that it is not easy to get 1% of China’s billion population to pay for a dating service. The best approach is to come to your potential investors with a realistic addressable market segment, where the figure is something reasonable for the investor to digest.
5. “We have a proven team”The best that this could mean is that the founders have a track record of creating wealth for their previous companies. But just because you were working for McKinsey as a consultant or Goldman Sach as an analyst doesn’t mean you have got a proven team. Don’t exaggerate your experience before you embark on the unknown business territory, rather show them your wisdom by keeping your boasts to a minimum.
6. “We have patents”Patents do not necessarily make a business defensible especially with the current state of Thai Law. In some more advanced countries, patents may provide a temporary competitive advantage, particularly in pharmaceutical and IT industries, but not always. For example, Thailand has recently broken the patents on Anti-AIDs drugs, using a strong humanitarian argument.

   This is not to say that you should not file patents, but don’t depend on them for long because it only takes a small tweak to file another patent to create something very similar to your product and yet different. We have seen this with the battle between MP3 players and the Apple iPod.

   The number of times which you should talk about your company’s patent potential is once. More than that will make your business look like it can only survive because of patents, and less than that will indicate no new innovation.

7. “Google is signing our contact next week”This may makes you look good at the time, but if the investors check back a week later and find that the contact hasn’t been signed, you are better off not saying at all. It is much more effective to talk about the big deals after it is sealed.
8. “We are the first”Like a double-edged sword, being the pioneer in the market can be great, but it might be wiser to follow the pioneer and then do it better by learning from their mistakes, eventually surpassing them.

   This reminds me of a story I had heard about Albert Einstein. It was said that he boarded a train and couldn’t find his ticket. The conductor reproached him, “Dr. Einstein, everyone knows who you are; surely Princeton can afford to buy you another train ticket.” To which Einstein replied something along the lines of “I’m not worried about the money; I need to find the ticket to figure out where I’m going.”

   Figure out first where you are going, how are you going to be different, and the money will follow.

Nikki Assavathorn raised the capital to set up MeetNLunch, the perfect place to meet like-minded successful and single professionals. Drop us your contact details at MeetNLunch.com, “the only thing you’ve got to lose is your single life!”