In this competitive scenario, securing investments is an essential step for business success. In April 2024, Brazil stood out significantly, representing 48.6% of the total invested in Latin America. That month, Brazilian startups raised $356.7 million in 73 investment rounds, according to the monthly report released by the Distrito platform.
However, many entrepreneurs, especially beginners, make mistakes that can compromise their chances of obtaining the necessary funding.
With this in mind, André Medina, Superintendent of Innovation at Andrade Gutierrez, a pioneer in innovation in the engineering and construction sector, listed the five most common mistakes startups make when seeking new investments:
1- Lack of adequate preparation
One of the most frequent mistakes is lack of preparation. Many entrepreneurs underestimate the need to be well-prepared before presenting to potential investors. This includes having a well-crafted pitch deck, a detailed business plan, and realistic financial projections.
“Investors want to see that the startup has a clear vision and a well-defined path to success. Therefore, inadequate preparation conveys a lack of professionalism and can deter investors,” points out the expert.
2- Unrealistic company valuation
Another common mistake is an unrealistic valuation of the company. Startups often overestimate their value, which can deter investors who consider the valuation disproportionate to the company’s development stage and achievements. An excessively high valuation can be seen as a lack of understanding of the market and investor expectations. It is crucial to base the valuation on concrete data and industry benchmarks.
3- Lack of knowledge about the investor’s profile
For André Medina, seeking investment without knowing the investors’ profile and preferences can be counterproductive. “Not all investors are suitable for all startups. It is essential to research and identify investors who have an interest and experience in the sector in which the startup operates,” he comments.
Presenting to investors who have no affinity with the business can result in wasted time and opportunities. Understanding what investors are looking for and adapting the approach is fundamental to successful fundraising.
4- Excessive focus on the product and little on market needs
Many entrepreneurs fall so in love with their products that they neglect market needs and demands. Investors look for startups that solve real problems and have a well-defined target market. It is essential to demonstrate that there is significant demand and that the proposed solution effectively meets the needs of the target audience.
5- Lack of transparency and honesty
Transparency and honesty are essential traits for establishing a trusting relationship with investors. Hiding information or presenting misleading data can have serious consequences.
“Experienced investors can identify inconsistencies, and once detected, the startup’s credibility is seriously compromised. Being honest about the challenges, risks, and needs of the company creates a foundation of trust and can, paradoxically, increase the chances of receiving investment,” concludes the executive.
