In this competitive scenario, securing investments is an essential step for business success. In April 2024, Brazil stood out significantly, representing 48.6% of total investments in Latin America. That month, Brazilian startups raised $356.7 million across 73 investment rounds, as highlighted in the monthly report by the Distrito platform.
However, many entrepreneurs, especially beginners, make mistakes that can jeopardize 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 proper 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. Poor preparation conveys a lack of professionalism and can deter investors,” notes the expert.
2- Unrealistic company valuation
Another common mistake is unrealistic company valuation. Startups often overestimate their value, which can deter investors who view the valuation as disproportionate to the company’s development stage and achievements. An excessively high valuation may reflect a lack of market understanding and investor expectations. It’s crucial to base valuations on concrete data and industry benchmarks.
3- Lack of knowledge about the investor’s profile
According to André Medina, seeking investment without knowing the investors’ profile and preferences can be counterproductive. “Not all investors fit every startup. It’s essential to research and identify investors who have an interest and expertise in the startup’s sector,” he comments.
Pitching to investors who are not aligned with the business can result in wasted time and missed opportunities. Understanding what investors look for and adapting the approach is key to successful fundraising.
4- Excessive focus on the product and little on market needs
Many entrepreneurs become so enamored 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’s essential to demonstrate significant market demand and how the proposed solution effectively meets the target audience’s needs.
5- Lack of transparency and honesty
Transparency and honesty are essential traits for building trust with investors. Withholding information or presenting misleading data can have serious consequences.
“Experienced investors can spot inconsistencies, and once detected, the startup’s credibility is severely compromised. Being honest about challenges, risks, and the company’s needs builds trust and, paradoxically, may increase the chances of securing investment,” concludes the executive.
