By Steve Walsh, Techstars Mentor-in-Residence and Founder of Hands On Angel LLC

Hey Founders,

Securing funding isn’t just about a great pitch — it’s about avoiding pitfalls that make investors walk away. Many founders unknowingly raise red flags that sabotage their rounds. Let’s take a look at the top five red flags investors look for when evaluating startups and how to tackle them head-on.

1. Know Your Numbers

Inconsistent numbers or unrealistic projections create distrust. Do NOT wing it. Understand how your current business ties to your projections. Investors need to see a founder who knows their numbers.

Pro Tip: Keep your P&L airtight and be ready to explain cash flow, burn rate, and profitability pathways with confidence.

2. Low or No Traction

Traction is your proof of concept. If you don’t have customers or measurable progress, investors question your product’s market fit.

Pro Tip: My favorite phrase is “Revenue Solves Everything” Focus on achieving visible milestones — customer adoption, recurring revenue, or partnerships — before raising capital.

3. Team Team & Yes Team

Investors are betting on your team as much as your product. At the early stage, we are betting on the team MORE than anything. Dysfunction, skill gaps, or founder disputes are deal breakers.

Pro Tip: Present a united front. Highlight complementary skills and show how your team is equipped to execute your vision.

4. Are You Solving A Real Problem

If your problem isn’t compelling or the market size isn’t scalable, investors won’t see the upside. If your product is a nice to have or a NEED to have.

Pro Tip: Paint a clear picture of your market size and how your product uniquely solves a critical problem.

5. Wrong Investor Targeting

Reaching out to investors who don’t understand your industry or fund your stage is a waste of time. Also, reaching out to the wrong type of investor (angel, fund, VC).

Pro Tip: Research investors carefully. Pitch to those aligned with your sector and funding stage for a greater chance of success.

Turning Red Flags Into Green Lights

Investors aren’t looking for perfection — they’re looking for clarity, competence, and potential. Addressing these red flags before you pitch will dramatically improve your chances of success.

Keep refining, keep building, and keep pushing forward.

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