{"id":47358,"date":"2023-10-20T15:53:23","date_gmt":"2023-10-20T15:53:23","guid":{"rendered":"http:\/\/startupsmart.test\/2023\/10\/20\/six-common-mistakes-investors-see-aussie-entrepreneurs-make-startupsmart\/"},"modified":"2023-10-20T15:53:23","modified_gmt":"2023-10-20T15:53:23","slug":"six-common-mistakes-investors-see-aussie-entrepreneurs-make-startupsmart","status":"publish","type":"post","link":"https:\/\/www.startupsmart.com.au\/uncategorized\/six-common-mistakes-investors-see-aussie-entrepreneurs-make-startupsmart\/","title":{"rendered":"Six common mistakes investors see Aussie entrepreneurs make – StartupSmart"},"content":{"rendered":"
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With the inescapable reality that most startups will fail, it\u2019s encouraging that many successful entrepreneurs around the world are advocating the importance of learning from failure.<\/p>\n

However, there are still many common mistakes investors regularly see that can be easily avoided, and doing so may just mean your startup succeeds.<\/p>\n

1. A lack of intimacy with the problem<\/h3>\n

Far too many entrepreneurs are trying to work in a sector they don\u2019t understand. Their ideas make sense only because they have limited information. It\u2019s important to work in your area of expertise and training.<\/p>\n

If they were intimately aware of  the problem and had deep industry networks and insights, they\u2019d be able to make better decisions as to what to pursue and how best to pursue it.<\/p>\n

2. Reading your own press<\/h3>\n

It\u2019s easy to get media coverage as an early-stage company but do not place any value on the coverage or conflate positive coverage with reality.<\/p>\n

The media dotes over milestones that aren\u2019t meaningful in a company\u2019s lifecycle. I\u2019ve lost money and time on flawed ventures by thinking that positive coverage meant I was heading in the right direction.<\/p>\n

A capital raising is a means only, not an end. It should be celebrated as such.<\/p>\n

3. Focusing on profile not traction<\/h3>\n

Generally there is an inverse relationship between the volume of media attention in a company\u2019s early stage and the company\u2019s actual traction.<\/p>\n

Atlassian, for example, in its early years focused on growing its client base, developing its product, and remained mostly silent in the media.<\/p>\n

Focus on solving a real problem, one that is worth solving, and building large enduring competitive advantages, not on media.<\/p>\n

4. Targeting the wrong investors<\/h3>\n

If you are raising capital and taking meetings, your time is precious.<\/p>\n

When meeting with a fund, ask them straight up how much committed capital they have, how much they\u2019ve invested in the last 12 months and how much is ready to invest. If they don\u2019t have at least five times what you\u2019re asking either on-hand or at-call, it\u2019s probably a waste of your time. Many venture funds in Australia take meetings with prospective entrepreneurs without capital ready to invest.<\/p>\n

If meeting with an angel investor or high net-worth individual, ask them what a model investment looks like for them, what their perfect deal entails, what their last deal looked like and if they can\u2019t give tangible answers then they are unlikely to invest.<\/p>\n

The majority of angel investors in Australia do not invest regularly, nor do they invest large sums – so the chance of success is low. Start with quality investment houses like AirTree or Blackbird who will generally like to get to know you early.<\/p>\n

5. Assuming pre-market valuations = market value<\/h3>\n

People like to talk about numbers, like \u201cJonny raised $5 million at a $45 million valuation\u201d. This does not mean the company is worth $45 million prior to the investment, nor that Jonny is a millionaire. It is only an implied number, worked backwards from what\u2019s hopefully an elegant incentive system designed by sophisticated investors to encourage a team to create enterprise growth.<\/p>\n

Valuations, and more importantly investment terms, are there to encourage positive behaviour by the management team, which is usually some vestige of the investors\u2019 past experience.<\/p>\n

6. Not recognising the ‘predators’<\/h3>\n

The number of predators looking to make money from entrepreneurs through various conferences, incubators, accelerators, programmes and the like is on the rise.<\/p>\n

Whilst mostly well-intentioned these \u2018predators\u2019 can reinforce bad habits from unsuccessful people; load up early ventures with debt; stunt equity configurations with unconventional, non-performing preference stacks; and even cause emotional distraction and pain for founders.<\/p>\n

In an early-stage venture where cash is tight, it\u2019s critical to ensure that everyone\u2019s incentives are aligned to the same goals, including the timeframe to liquidity and how parties make money.<\/p>\n

Avoid scenarios in your cap table where people are making money before you do. Be wary of people who claim to know a path to success or who claim there is a short-cut, particularly when their advice requires you to buy something from them.<\/p>\n

There is not a formula for entrepreneurship so avoid anyone who tells you there is.<\/p>\n

Follow StartupSmart on<\/em> Facebook,<\/em> Twitter,<\/em>LinkedIn <\/em>and <\/em>SoundCloud.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

With the inescapable reality that most startups will fail, it\u2019s encouraging that many successful entrepreneurs around the world are advocating<\/p>\n","protected":false},"author":1,"featured_media":62714,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5,9,1],"tags":[],"_links":{"self":[{"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/posts\/47358"}],"collection":[{"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/comments?post=47358"}],"version-history":[{"count":0,"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/posts\/47358\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/media\/62714"}],"wp:attachment":[{"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/media?parent=47358"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/categories?post=47358"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/tags?post=47358"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}