Getting funding when you are a startup company is never easy. It is competitive because every startup needs investment and most are vying for the best and most prestigious venture capitalist (VC)! However, most VCs end up passing on the vast majority of deals they come across, making it even harder for startups to win investment.
So, how can you make sure your company is the one that secures investment?
Unfortunately there is no quick and easy strategy you can follow to make sure you are 100% successful in securing investment. However, despite this there are 7 mistakes that if carefully avoided will give you a much better chance of success.
1. You’re not providing a solution to anything
One of the worst things for a VC to come across is an entrepreneur who genuinely believes their product is the next best thing since sliced bread, however, they haven’t really thought about demand. Who wants this product? What problem or challenge is the product solving? VCs want to invest in something that is going to appeal to the masses and solve a big problem, not a minor inconvenience.
2. You market is too small
When thinking about your market, you need to think BIG! The best VCs will be looking to invest in businesses that have the potential to become billion-pound companies and for this to happen, the market interest needs to be there. So make sure you’ve done your research into the market and show that your business has potential.
3. You don’t have the talent on board to deliver your idea
So many entrepreneurs come up with a great idea but don’t have the tech talent behind them to actually deliver the idea. If this is the situation you find yourself in then it will have a hugely detrimental effect on a VC’s opinion of you. Your credibility will be harmed and you will have most certainly ruined your chance of securing investment.
4. You’re entering into too competitive a marketplace
If you choose to enter into a market that is already full of big players then it shows a certain lack of judgement on your part. Unless you can show how you are different and how you will attract custom away from these big players, be prepared for some serious interrogation from VCs.
5. Your product isn’t as good as what’s already out there
When pitching for investment you must be able to show how your product differs from what is already being offered in the market, and, most importantly, how it is better! If you are offering something that is not as good as what is already out there, then no VC in their right mind would offer you the investment you are after. You must be better!
6. You haven’t presented bottom-up analysis
VCs are all too often given a pitch where they’re presented with top-down nonsense where entrepreneurs state how they’re aiming for a target market that is however many billion in size and how, if they can access X% of it then they will achieve Y billion in revenue. However, this is all so speculative that VCs won’t believe a single word.
You need to show bottom-up analysis and break down all the economics of your product and show in detail how you will achieve your first million. This will be a lot more convincing and give you more credibility.
7. You’re not showing enough passion
Last but by no means least, if you can’t show passion for your business idea, then why would a VC be inspired to invest in you? You have got to have passion for, and confidence in, your business. If you can show both of these things, you may well find it is contagious and an investor will be caught up in your own excitement. If you love your product, people will be able to tell and they’ll be more likely to invest in you.
So, take care to avoid the 7 above mistakes and hopefully you will be on track to receiving the investment you’re pitching for. Good luck!