Business startup
Business startup

Startup entrepreneurs pitching venture capitalists have access to an endless stream of advice on tweaks. These tweaks can be made strategies they can use to manage the fundraising process.

Founders seeking capital should try to get every edge they can. They should also be cognizant that there will be some deals that just can’t be closed, no matter what tips or tricks are brought to bear. Here are 5 reasons you won’t get funded that aren’t your fault

1. They’ve funded too many companies in the new year

There are perfectly good startups that don’t get funded because of when they approach a particular investor. Sometimes an investor is too busy prosecuting other deals. Moreover, they might have just finished leading a few investments and don’t want to put more capital to work right away.

The timing of investments is a subtle decision-making factor that many founders don’t fully appreciate. There isn’t an algorithm determining how quickly an investor will deploy their capital, but there are rules of thumb. For example, a partnership of two investors who want to deploy a 30M fund in three years will each invest something like 5M per year.

The problem is that deal flow can be uneven. An investor may end up leading two deals with 1.5M checks in January when a genuinely compelling third deal comes along. Writing that third check would use up that investors annual grant in the first month of the year, so they may demure even if they would likely lead the deal six months later. Investor psychology matters, especially at the earliest stages.

RELATED  Forex trading in Kenya: What you need to trade profitably

2. They’ve lost huge sum of money in your category

It’s hard to objectively evaluate an investment opportunity in a market where you’ve lost a huge amount of money. If a startup’s pitch sounds too much like one that lost an investor a small fortune, the scar tissue reflex may limit opportunities for the startup at that particular fund.

3. They don’t see your category as viable

Software is eating the world, but there are still markets that seem unappetizing to most investors . There was a time when it seemed crazy for tech investors to invest in startups. Thanks to the runaway success of most tech companies, investors are more excited about the prospect of investing in “Digital Brands.”

4. They’re taking a meeting with you as a courtesy

When an investor gets excited about your startup, they’ll often try to syndicate the deal . A warm intro is a sign of validation from the interested investor. This is because the recipient may not be excited about your startup. Still, they’ll take the meeting as a sign of respect for their colleague. This isn’t terribly common, venture capitalist generally have a good idea of what their contemporaries are interested in. If you’re not getting a sense of excitement even with an enthusiastic endorsement from a credible backer, this may explain why.

It is advised that entrepreneurs send their pitch deck along immediately after the venture capitalist makes an introduction. This gives the recipient a chance to offer a quick no which is better than wasting time in a face-to-face meeting.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.