Business Plan Writer for Companies Raising Capital

The Top 5 Reasons Why Investors Aren’t Funding Your Company

The Top 5 Reasons Why Investors Aren’t Funding Your Company

Did you know that there were 64,380 companies that received $21.3 billion in 2016? (Stat is provided by the Center for Venture Research). Historically, only 15% of companies that are seeking money receive investment.

There are 5 primary reasons why investors aren’t funding your company. But before we discuss those them, I want to expand your idea of who invests in your company. Yes, investors are those that give you money. But they also give you time. Therefore, your management team is investing in your company. Mentors, advisors, and board members also invest in your company. So think about these 5 factors as you pitch your business.

  1. There’s a problem with the market opportunity. You must be able to articulate your target market and their needs. But that’s not all. Sometimes your product is before its time and/or the target market requires a lot of education before they buy. Other times, the target market cannot easily be reached.
  2. Your product doesn’t have a true competitive advantage (or it’s seen as inferior). If a product doesn’t have a true competitive advantage, social media will “put you on blast.” Investors must also feel like your product or service offers something different and slightly better than what’s out there.
  3. There’s no proof of concept. Have you sold any products thus far? Do you have preorders? Have prospects pulled out their wallets and proven this will be a successful company? If not, then a beta test is the next best thing.
  4. Leadership has no or limited start-up experience. I always compare a great business team to a great football team. Football teams have a strong offense, defense, and coach. In business, offense scores points (or makes revenues) for the company. Defense protects the company (accounting, insurance, technology). The coach oversees the players. If you’re great at product development, you need someone great at marketing in the company. If you’re a great marketer, perhaps you need someone great at finances. If you’re young, perhaps you need someone with ‘salt and pepper hair.’
  5. The financials don’t make sense. Can your business make enough money to give the investors a return on investment? You need to understand your numbers and defend your financial assumptions.