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“NO.”
This one little word may be essentially the most painful thing an entrepreneur can hear once they are desperate for funding for his or her dream enterprise. Unfortunately, most entrepreneurs will often hear “no”. According to a study published within the Harvard Business Review, just one% of meetings with potential investors turn right into a partnership.
While it was difficult for me to listen to investors reject my pitches as an entrepreneur, now that I’m on the opposite end of the spectrum, I find it equally difficult to reject emerging startups. Fortunately, my years of experience in each positions have helped me higher understand the minds of investors. That’s why I would like to share seven the reason why investors may reject your enterprise offer.
1. Your numbers are flawed
Part of meeting with potential investors is sharing the raw numbers about your organization. For some this just isn’t an issue, while others feel a bit anxious and will even consider changing the sound to be higher than it actually is. Perhaps it was an honest mistake. Either way, enterprise capitalists are smart and can at all times detect inconsistencies, especially in the event that they do their due diligence – and they’re going to.
If they think your numbers are incorrect, they’ll call you about it. Integrity and competence are essential to a solid business partnership, and failure in either area could jeopardize your repute.
2. Poor consumer perception
This could appear obvious, but in case your target market doesn’t buy what you are selling, investors won’t either. Even in case your sales numbers are strong, in case your customers aren’t completely happy together with your services or products or there is a consistent theme of dissatisfaction, it’s a transparent sign to step away from the table.
Venture capitalists have to know that you simply are doing every part possible to make sure customer satisfaction and care. If they’re completely happy, satisfied consumers should not only more prone to remain loyal to your organization, but they usually tend to share your services or products with others.
3. Your company lacks diversity
Culture matters. This is what makes good organizations higher. A key a part of developing a powerful culture is accepting and hiring people from different backgrounds and perspectives. This is how innovation develops.
A scarcity of diversity in your organization now may tell investors that constructing a various culture will turn out to be a problem as your organization grows later. One caveat: don’t concentrate on reaching some “limit”. It should come from a real desire to expand your horizons and create positive change on your company and industry.
4. You seem difficult to work with
Even in the event that they imagine in your enterprise, most enterprise capitalists won’t hand you a check and pat you on the back. No, it’s more about constructing a long-lasting partnership that can ensure your organization’s long-term success.
This implies that despite the fact that you have got built a business, you might be still open to latest ideas and suggestions for improving it. Investors know what works and what doesn’t, they usually’re willing to pass it on, but only to someone who’s willing to listen. If you come across as an entrepreneur who has to do things your way, you’ll need a tough time finding willing suitors.
5. Your company won’t stand out
You can have a solid business model with a high-quality services or products, but your organization will mix in with the remaining if there’s nothing to distinguish you from what’s already on the market. In a market that is probably going saturated with similar ideas, investors need to see something that can make your idea stand out. How modern is what you offer than what currently exists? If not, they will not have an interest.
Successful entrepreneurs know their market and customer base in and out. They have done extensive research on what others are doing in order that they’ll provide something unique.
6. You are underprepared
Just meeting enterprise capitalists is a feat in itself. They receive lots of of proposals and suggestions, and their time is a limited resource. There isn’t any second probability.
If an investor’s query surprises you otherwise you haven’t got a satisfactory answer prepared, you almost certainly won’t gain their trust and support. I do know you are probably putting in 20 hours a day to make your dream come true, but you’ll be able to’t afford to take a break when you have got the possibility.
You’re under plenty of pressure, nevertheless it’s also a terrific opportunity to indicate investors which you can handle it. Despite every part you are going through coming prepared for each possible scenario or challenge it demonstrates your ability to run a successful business.
7. It just doesn’t fit
Rejection doesn’t at all times mean there’s something flawed with your enterprise. Sometimes investors say no because your organization doesn’t fit their investment portfolio. Every enterprise capitalist has a selected investment strategy that he sticks to. It was because of him that they achieved success. Sometimes they’ll risk implementing a business idea outside their area, but only once they are sure that it’s a possibility that can not be missed.
For some, it could be less in regards to the industry or market and more in regards to the stage of development of your organization. Regardless, do your homework on the investors and corporations you meet with. What is their typical profile? What markets do they typically goal? Do they have an inclination to take a position more in Series A financing or other rounds? Like every other job interview, it’s worthwhile to know who you are interviewing and prepare your questions.
These are only a number of examples of why it’s possible you’ll not get the support you are hoping for from investors. This may be because of countless aspects, a few of which you have got control over and others you do not. The best advice I can offer you is to make use of every rejection – every “no” – as fuel to enhance your organization, your product, and yourself until you discover the “yes” you might be searching for.