7.5 startup mistakes. Mistake number 1 - "Give a million" or the magic of round numbers

7.5 startup mistakes are a series of publications about ambitious expectations and big disappointments of entrepreneurs, about momentous, and sometimes absolutely wrong decisions, about bad taste in business and advice, which is better not to listen.

Based on many years of experience working with start-up entrepreneurs and venture capital investors, creating and running acceleration programs for start-ups and business angels, GVA LaunchGurus Business Development Director Daniil Kozlov talks about start-ups' mistakes in their business development.

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Daniel Kozlov:

In my work with start-ups, the scene in the Golden Calf regularly comes to my mind, where a beggar sent by Ostap Bender, asking for “Give a million, give a million, give a million,” begins to stumble onto the underground millionaire Koreiko.

It seems that almost a hundred years have passed since the writing of the book, but the notorious million still teases and stirs the minds of Russian entrepreneurs.

For some reason, a million dollars, and sometimes even rubles (less common options of 5 and 10 million rubles) often pops up as the amount that our entrepreneurs require investors to develop their startup.

At the same time, the fair question, why exactly 1 million, usually introduces a Russian start-up to a stupor. “Well, how” - they shrug - “I counted here in the table, it turns out a million”. The most common answer is “to refine / develop a product”. And here any conscious investor mentally says goodbye to an entrepreneur and then hears about his project only out of politeness.

More advanced startups cunningly say that investments are needed “for development, marketing and sales”, which, in fact, does not save them at all, as any round number with 6 zeros already shows that the entrepreneur did not bother to count how much he really needs.

There are more complex variations, 100, 150, 200 and 500 thousand dollars. Behind them are often calculations, but the numbers still remain round. The magic of round numbers is mysterious and inexplicable. Is it really so hard to guess that a well-thought-out financial model with a probability higher than 99.9999% will not give you the round figure needed for investment?

And who, do you think, will make a greater impression on the investor: a person who asks for 150 thousand dollars or a person who asks for 139 thousand? Each investor first of all wants his or her investments to be treated carefully and thoughtfully. If you decide that throwing 11 thousand on top is quite normal, then you are mistaken. This is the first wake-up call regarding your attitude towards investor money.

And the point here, unfortunately, is not in concrete figures, but in demonstrating maturity as a businessman and an entrepreneur, a person who is ready to be responsible for his promises and the money he plans to spend.

And in the extreme case, if you are not really sure how much you need, do not come to an investor with standard numbers, try to stand out from the crowd and ask for a non-circular amount. Better yet, first talk to the investor about how, besides money, he can help you, and then go on to investments. After all, perhaps non-financial assistance will be much more valuable.