Prospective Investees should read and understand the following:

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1. I have a good idea. I have a good chance of being funded.​​ 

- Wrong.  A good idea is a necessary start but fund-raising is a multi-phase effort. Any 'red flag' can throw the investment off course. The fact is <5% of ideas get funded.

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2. I have a great idea but no revenue yet.  I will generate revenue once the investment is in.

- Wrong.  Barring exceptional cases, no revenue means no investment.  A savvy investor will not allow the investment to become your tuition.

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3. The investment is confirmed once the investor says 'yes'.

- Wrong.  Far from it.  The deal can change anytime during the negotiation phase.

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4. The investor and I have great chemistry.  There is no need for paperwork or Due Diligence(DD).

- Wrong.  A seasoned investor will not disregard DD.  He is accountable to his own investors and partners.​  A lack of paperwork will cause misunderstandings and rifts down the road.

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5. Once the money is in, the investment is confirmed.

- Wrong.  The investor can demand to rescind the deal and have the money returned if he feels he has been misrepresented.

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6.  I have money of my own but I will use OPM.

- Wrong.  Why use OPM if that means giving away equity?  An investee who does not put himself/herself on the line shows no sign of sincerity or readiness for an investment.

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7.  I don't mind giving up equity in exchange for OPM.

- Start-ups should always maintain as much equity as possible when they are young.  Giving up equity too early indicates a lack of prudence.

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8. DD serves the investor and is a chore to the investee.

- Wrong.  DD serves both parties.  The investee can exploit it to find out more about the investor as well.  The DD is also a form of insurance for the investee, to add defence to his position in the event of claims of misrepresentation by the investor.

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9. The investment is in one lump sum.

- Wrong.  There is always a schedule that plans out when the next tranches of cash are released.

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10. If I get funded, I will pay myself for the many months I went unpaid to build up the company to where it is today.  

- Wrong.  Investors want their money to go into assets to build the next chapter, not to settle outstanding liabilities.  

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11. The investment is in the form of equity, not a loan.  The money need not be returned.

- Wrong.  The investment may be in the form of a loan, a convertible instrument, straight-equity or services.

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12. If the company needs further funding, the investor is there to help.

- Maybe.  Not a given.

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13. Similar ideas are valued in the millions in Silicon Valley.  Therefore, a similar valuation for my company too.

- W.R.O.N.G answer.  You should pitch in the Valley then.

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14. My advisor who is an investment-banker/lawyer/accountant/entrepreneur values us at $x-millions.  This valuation is fair.

- Wrong.  He or she should put his own money in.

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15. I do not know how to value my company.  What do you, as the prospective investor, think my company is worth?

- It does not work that way.  You pitch, we catch.  If you do not know your company's valuation, the conversation cannot proceed.

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16. I can value my company in a 'bespoke' (as opposed to a systematic and financial) manner.  

- Wrong.  Business performance is always measured by numbers.  If the company does not have sales or distribution, it is not investable. 

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17. The investor is 'one of us' and will always back me up.

- Depends.  An investor is closer to being a boss than a friend.  He or she will eventually want his/her money back.

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18. The investor is going to handhold, assist and mentor me.

- Maybe, but only to a certain extent.  He or she has a full time job already and is not going to do your work.  You are expected to make the business work.  

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19. The investment will arrive within weeks.

- Wrong.  It can take 3 - 9 months.  Or not at all if something throws it off-course.

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