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Top Silicon Valley venture capitalist: These are the 2 biggest mistakes new entrepreneurs make when asking for money

Theresia Gouw speaking at Vanity Fair's Founder Fair in New York City.
Photo by Andrew Toth

Theresia Gouw is a force in Silicon Valley venture capital. As co-founder of VC firm Aspect Ventures, she has led investments in success stories like The Muse, BirchBox and BaubleBar. She has been named to the Forbes Midas List, which ranks the best tech investors, six times, including in 2017. Before launching her own firm, she worked at Accel, where she took companies public, such as Trulia, or saw them through to acquisitions, such as LearnVest to Northwestern Mutual.

It's fair to say that Gouw has listened to a lot of entrepreneurs ask her for money. And though there are many reasons start-ups may not get funding, Gouw said these are the two biggest, most universal mistakes she sees when being pitched by newbie founders.

Not talking about a company's competition

Too many founders don't include any information on competition when pitching their start-ups, which is a "personal pet peeve," said Gouw, speaking at the Vanity Fair Founders Fair in New York recently.

"My view is, either you are being incredibly naive, or worse, trying to deceive me," she said. "Or, at best, it means that your market is so small there [are] no competitors.

"So, go and talk to me about what other things are out there," said Gouw, "because there is always competition."

Seeking investment too early

The second common mistake Gouw sees is entrepreneurs approaching venture capital investors too early in the growth of their companies.

Even if a business does not have a customer base yet, Gouw said, the founders still need to somehow show the product resonates with the market. This is especially true for software start-ups, which are Gouw's focus.

"These days it is so inexpensive to start a software company. Show some early product traction," she said.

In addition to evidence of "product-market fit" or demand for what they're selling, founders should be able to explain what they will do with the money they are asking for, she said.

Just an idea or a business plan is not going to give a venture capitalist the confidence he or she needs to invest money in a founder or a company, said Gouw.

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