Business minefield: 5 pitfalls startups should avoid when seeking new investors

In this competitive scenario, capturing 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.In this month, Brazilian startups raised US$ 356.7 million in 73 investment rounds, as indicated by the monthly report released by the platform Distrito.

However, many entrepreneurs, especially beginners, make mistakes that can compromise their chances of getting the funding they need.

Thinking about it, Andre Medina, Superintendent of Innovation of Andrade Gutierrez, a pioneer in innovation in the engineering and construction sector, listed five most common mistakes that startups make when seeking new investments:

1- Lack of proper preparation

Many entrepreneurs underestimate the need to be well prepared before introducing themselves 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 drive away investors“, says the expert.

2-Unrealistic assessment of the company

Startups often overestimate their value, which can drive investors away from considering the valuation disproportionate to the stage of development and the company's achievements.An overly 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- Unawareness of investor profile

For Andre Medina, seeking investment without knowing the profile and preferences of investors can be a shot in the foot.“Nem 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 have no affinity for the business can result in wasted time and opportunities. Understanding what investors are looking for and adapting the approach is critical to successful fundraising.

4- Excessive focus on the product and little on the market needs

Many entrepreneurs fall so in love with 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 meets the needs of the target audience effectively.

5- Lack of transparency and honesty

Transparency and honesty are essential characteristics for establishing a relationship of trust with investors.Hiding information or presenting data in a misleading way can have serious consequences. 

“Experienced investors can identify inconsistencies and once detected, the credibility of the startup 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 the” investment.