How to Avoid Scaring Off Investors

Incorporate these simple lessons into your business to eliminate red flags that drive investors away.

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Every industry—and every company—needs visionaries. These are the leaders with the big ideas who possess a driving passion for the business and generate excitement. Investors often are lured in by the dazzling personality of a visionary or the compelling way they pitch their product or service, but it takes more than a song and dance to convince them to open their wallets. A visionary who cannot back up claims with a clear path forward quickly will lose favor among investors.

If you or your business is counting on a single person or vision to secure and maintain investment, you’re going to lose opportunities. Here is what to avoid if you want to attract investors and keep them interested.


Don’t mistake the sizzle for the steak

Sometimes a company’s visionary has the knowledge and skills to manage a business, but more frequently they do not. Don’t make the mistake of thinking your chief executive officer’s amazing presence and sparkling personality will provide enough energy to fuel the imagination of investors. Be certain your business has a well-researched and carefully constructed business plan as well as the knowledge and experience to pull it off.

Keep in mind visions do not make a business successful—people do. Investors want to know there are experienced, talented people behind your vision. It is not enough to know your vision; you also must know the business of doing business, inside and out. Therefore, identifying the skills your company lacks and how to acquire those skills is critical to gaining investor confidence. Investors want the excitement of a grand vision, but they also want the security of a capable team.

To that end, recruit your staff with an eye toward filling in any knowledge gaps, and be able to provide evidence that your team has the skills and knowledge to navigate the ups and downs of running a business. To an investor, an inability to manage a balance sheet or properly forecast cash flow is an alarming red flag. If your company’s visionary does not know how to run and manage a business, know this is not unusual—but be sure to find someone who does know how to do both in order to boost investor confidence.

Build toward a goal

Companies love pointing to big announcements of product launches, significant new hires, or big innovations to draw attention. Although these accomplishments are important and may create headlines, earth-shattering company news does not occur every day. Do not depend on it to drive investor interest. Instead, create a timeline for achieving your vision as part of your overall strategy, and set goals to reach the vision. Milestones achieved consistently along the way often can make stronger and more frequent impressions among investors than huge, once-in-a-lifetime wins. What’s more, attempting to execute a grand vision prematurely rather than one step at a time can set off alarm bells. Attempting to do too much too soon can appear disorganized and costly. Demonstrate your team’s skill and efficiency by sticking to incremental goals.

To that end, keep milestone goals trackable and attainable, with the knowledge that small successes today set the stage for future major achievements. Resist the urge to hype accomplishments prematurely. Above all, maintain an even keel. Investors want to see movement and momentum on an ongoing basis rather than fits and starts that appear unplanned or haphazard.

Cover the basics

In order to avoid the appearance of “head in the clouds” leadership, balance your aspirational vision with a firm and clear-headed recognition of reality. Demonstrate that you have an understanding of what your business will need to succeed along each step of the way. Be able to articulate your approach for scaling the company when the time comes—and know how to identify when that time arrives. In addition to developing these long-term strategies, be certain your business has the basics covered.

  1. Demonstrate a clear understanding of cash-flow management.
  2. Maintain clean, clear, and realistic financial projections.
  3. Determine a compelling product or service differentiation that shows why your company rises above the competition.
  4. Know your addressable market size and secure applicable intellectual property.
  5. Recognize current shortfalls and have plans to overcome them.

The brief history of the cannabis industry has seen its fair share of bold-talking entrepreneurs who started out strong only to crash under the weight of their hubris. Investors see this arrogance as an instant turnoff and a warning sign that business challenges will be met with stubbornness and resistance. On the contrary, a sense of humility and a willingness to listen to feedback demonstrate an open approach many investors recognize as essential to success. Stay humble and grounded, and leave no doubt your company can work together with investors.

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