In this competitive scenario, attracting investments is an essential step for business success. In April 2024, Brazil stood out significantly, accounting for 48.6% of the total invested in Latin America. This month, Brazilian startups raised US$ 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 jeopardize their chances of obtaining the necessary funding.
With this in mind, André Medina, Innovation Superintendent at Andrade Gutierrez, a pioneer in innovation in the engineering and construction sector, listed five of the most common mistakes that startups make when seeking new investments:
1- Lack of adequate preparation
One of the most common mistakes is lack of preparation. Many entrepreneurs underestimate the need to be well prepared before presenting themselves to potential investors. This includes having a well-prepared 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 specialist.
2- Unrealistic company valuation
Another common mistake is the 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 investors' expectations. It is crucial to base the assessment on concrete data and industry benchmarks.
3- Lack of knowledge of the investor profile
For André Medina, seeking investment without knowing the profile and preferences of investors can be a shot in the foot. "Not all investors are suitable for all startups. It is essential to research and identify investors who have interest and experience in the sector in which the startup operates," he comments.
Introducing yourself to investors who are not familiar with the business can result in wasted time and missed opportunities. Understanding what investors are looking for and adapting the approach is essential for successful fundraising.
4- Excessive focus on the product and little on market needs
Many entrepreneurs become so passionate about their products that they neglect the needs and demands of the market. Investors seek startups that solve real problems and have a well-defined target market. It is essential to demonstrate that there is a 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 qualities to establish a trusting relationship with investors. Hiding information or presenting data in a misleading way can have serious consequences.
“Experienced investors can identify inconsistencies and, once detected, the startup’s credibility is seriously compromised. Being honest about the company’s challenges, risks and needs creates a basis of trust and can, paradoxically, increase the chances of receiving investment,” concludes the executive.
