Ramesh Sharma is CEO of TPG UK and founder of TechCityNews.com. In this article he explains why some startups may struggle to get funding.
Cash is king. There’s really no disputing that. That’s why most entrepreneurs will hanker after angel investors in hope of securing funds to get their brilliant idea in the form of a startup off the ground.
But truth be told, over 95% of entrepreneurs will fail to convince investors to channel their hard-earned money into their cause, however small or large of an amount they need.
Here are six major reasons why very few people will support your upcoming business project.
1. You demonstrate poor leadership skills
It all starts with you.
As much as angel investors/banks/venture capitalists invest in your idea, they are also, to some extent, entrusting YOU with their money. Don’t expect anyone to dish out money for your project if your leadership skills or reputation are questionable.
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2. You have an inexperienced team
Nobody is going to pump funds into a project which is doomed to fail. Show your investors that you and your team have what it takes to pull off your proposed idea and spur it into action, and you’ll be more likely to see them pull out the large notes.
3. You’re venturing into an already conquered territory
If there’s already a dominant player in your preferred niche, then it’s obvious that you’ll have a hard time convincing investors that your idea won’t be overshadowed by competition in the market. Most investors would prefer bankrolling someone with a novel idea as opposed to an entrepreneur with a recycled invention.
4. You don’t have a proven business model
After all is said and done, almost all investors and donors will look at your project’s bottom line.
They will ask tough questions such as, “What’s the estimated period for the ROI (Return on Investment?)”, “How far into the future are you projecting to break into the market?” “What are your strategic business plans to deal with emerging competition?”.
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If you don’t have the answers, they’re likely to put their chequebooks away.
5. You’re pitching your idea to the wrong set of people
People will fund and invest in what they value.
Chances of a simple-minded rural farmer investing in the idea of a wearable smartwatch, for instance, are close to none.
Instead, you’d be better off pitching that idea to investors in the technology sector that can recognise the significance of such as invention in the market.
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6. You’re ‘cold calling’ potential investors
Initiative is always appreciated.
You might have the most ingenious business plan, but if you don’t take your time to build meaningful and professional relationships with your investors (e.g., making an effort to meet them physically) don’t expect them to fund your idea.
When it comes to securing funds for a startup, it’s not what you bring to the table but rather how you unwrap it before your potential backers that will get you the money.