Have you had a potential investor turn away from your business for seemingly no reason? Investors don’t usually turn away from good opportunities, was there something that made your company or business plan unappealing? Here are seven reasons startups make themselves unattractive to investors.
There’s no proof of concept
You can find good ideas everywhere, but only a few of those ideas will actually end up profitable for everyone concerned. Good investors know this and will only put their money into a company that has proof that it can turn a profit.
Think of your profitability as your resume and your investor as a potential boss. Do you have a history of entrepreneurial success? Have you successfully run a crowdfunding campaign? Is this your first startup? Potential investors will want good answers to these questions, or they may decide to take their money elsewhere.
You have an inexperienced team
Operating a startup is not for everyone. You and your team must have experience in your field, enough to withstand the demands of a new business. If your team doesn’t look like it can handle the journey, it will turn-off potential investors.
Granted, you won’t always have an all-star team, but you need to make sure that they have the right credentials and experience. Your idea isn’t going to get anywhere if your team doesn’t look like it can handle the startup journey.
Your business plan is questionable
It’s said that no plan survives the first contact, but you must at least have some plan, to begin with. You need to show your investors that you have a plan to take this business somewhere great. Interest from your target demographic is not enough – you need a business model that can effectively take advantage of this interest and turn it into growth. A lack of a business plan can not only send investors scurrying off; it can also doom your business.
No proof of profitability
Your company must be able to turn a profit. That’s the bare minimum required for a company to get anywhere. People must be willing to pay for your product. Investors won’t put money into a company that can’t generate sales.
You’re not focused
If your company is trying to launch every single product idea that it has, you won’t be getting any investment anytime soon. Instead, stay on track and focus on creating the best product that you can release.
You’re not going to please every customer. But you do have to please the right customers, or the situation will come back to burn you.
You’re resistant to input
Entrepreneurs are often headstrong, but they’re also open to criticism. They’re still people and still fallible. Investors will often voice any concerns they have with the company or the founder and may hit some nerves. Responding negatively or harshly to criticism can cause an investor to rethink associating with that company.
Criticism can be difficult to take but don’t take it personally. What you should do is take a deep breath, speak in a calm tone, and engage in a discussion to understand where the criticism comes from.
The company needs too much money
You might think that your company deserves five million dollars, but investors may not see it that way. The chances are that you may have overestimated the value of your startup. Be honest with yourself and look at what your company has accomplished and where it could really go in the next five years.
Take the fact that you love your company out of the equation. View it as mechanically and as methodically as possible. If you value your company properly, investors are more likely to stick around.
Being an entrepreneur isn’t easy. You need to have a good idea, a good team, a company that can prove itself profitable and you need to show all of this to any and all potential investors so you can take it to another level. Before you talk to an investor, think about things from their perspective. Think about what would stop you from investing in your company, and you will find the flaws that need fixing.