Why Startups Fail to Impress Investors and Secure Financing

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By guest writter David Webb from bizzmarkblog.com 

The number of investors pales in comparison to the number of startups popping up every day in each part of the world. Take, for instance, Britain – according to their online statistics, 139105 startups have been launched this year alone. The competition is fierce, to put it mildly, making it all the more difficult for newbies in the game to gain their potential investors’ trust.

However, having a brilliant idea is not the only prerequisite for your investors to take you into consideration, and your competitors aren’t the only factor that can lead to failure. You also need a long-term plan and plenty of research to back up your expectations, so that they would have a steady basis for funding your project.

Despite their extensive knowledge and an ingenious idea waiting to happen, startup owners often make several key mistakes in seeking various funding opportunities. Let’s see which the most frequent missteps are and what you can do to avoid them in the chase after your own investment!

1. No strategy to back you up

With such a strong focus on landing the right investment, startup owners get sidetracked by a slew of responsibilities, so they end up forgetting about the key aspect of the pitch: the long-term strategy of using the said investment. The simple truth is, no amount of your entrepreneurial passion can make up for the lack of a roadmap, which is precisely what your investors will find critical when making a decision.

Start by assessing your initial financial situation, budgeting needs, and which areas of your business can work with or without the investment. Based on your findings, you can create a short-term and long-term funding system, so that your investors can have a clear overview of how you plan to spend their money. After all, they need to have a solid reason to take the leap, and having a financial strategy is the best one you can offer in the earliest stages.

2. Fast and furious with pitching

On the other hand, there are many startup owners who are too busy thinking of the perfect pitch that they fail to think of the other aspects of their approach. What about choosing the right timing? The optimal setting? Letting the investors learn about you and your business before you get down to the actual check?

When they are looking to invest a hefty sum into a business, it becomes more than just the idea and the profit, but the people they will be working with and ultimately supporting. Perhaps a few conversations before you start discussing funding can be beneficial both for you and your potential investors. The right moment for your sales pitch has the power to make or break your relationship with the investors, so choose it wisely.

3. Doing your homework

Your main motto for this particular conundrum should be “be prepared”. They will have questions, they will not come unprepared to those meetings, and if they sense that you only have your passion to rely on, they will not be eager to sign up. It won’t be enough to only have an in-depth understanding of the market, but you also need to demonstrate your knowledge and use it to support your goals.

Knowing your own niche, as well as your competitors, will determine whether you need equity funding, or another type of investment, such as taking a bank loan or borrowing money from your friends and family. This will, in turn, shape your entire approach to finding the right investors and crafting your pitch. Showcase your expertise from all angles, and you’ll start earning their trust.

4. Aiming for the wrong investors

Startups owners often get discouraged when they get rejected the first or the second time, and they start to question the value of their offer. Sometimes this is a good way of restructuring your battle plan, to see where you’re missing out on opportunities or if you are knocking on the wrong doors to begin with. It doesn’t necessarily mean that there is something wrong with your idea, but that you still haven’t found the perfect match among investors.

The main thing to remember here is to keep trying, and always take a few lessons after each so-called defeat. Asking for feedback is another way to see what’s missing in your presentation or if you have positioned your idea in the market well enough to make it appealing to investors. Look for patterns in those failed attempts and see if you can find a different pool of people to talk to, because there is no point in forcing something that simply doesn’t work. There is an investor out there who will love your idea, perhaps all you need to do is put on the right pair of glasses to see them.

5. Lack of passion

In the previous scenarios, your passion was one of few factors that couldn’t make a difference due to other mistakes. However, believe it or not, there are startup owners who fail to express their excitement and vision to the right extent for investors to be drawn and convinced.

Since you have decided to step into a minefield of competitors, your passion and dedication will help you stand out and persevere. If your investors get the feeling that you will retreat and give up at the first sign of struggle, they will not take the risk. On the other hand, if you intertwine your skills, know-how, and your zeal, they will start lining up at your door soon enough!

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