Top 10 Reasons Why Investors Give Up on Startups

5 min read

As a startup, you need money and expertise to start your business. You find investors who believe in you and invest in your business. You cannot start a business only with your money. You have to find an investor who can help fuel growth for your startup. Startups can earn good money shortly with their new and innovative ideas; However, there can be a few reasons why investors might hesitate to invest or pull out from your startup.

Following are the Top 10 reasons why investors are not investing in your startup.

1. No Niche

The most obvious and common reason for not investing in your startup is risk. While investors are willing to take this risk they would never do it if the risk ratio is too high. They would closely evaluate your product/service offering and associate a success/failure risk ratio to it. The higher the probability of your product is similar to others in the market, the higher are the chances of investors starting to lose hope in you.

2. Inexperienced team

Investors will reject your startup if they do not find your team capable of handling your business. It is essential for you to put a disciplined team together. The team needs to be one that is aligned with you and your companies’ objectives. In addition, your team should have appropriate skills, qualifications, knowledge, and experience. A holistic team make a good prospect towards attracting investors. 

3. Improper business plan

If you are not able to express your business to the investor, they will lose interest in your startup. You should be able to sell future prospects to investors and how committed you are to achieve it. If they don’t understand your plans and don't believe in your commitment, they will not invest in your startup. Additionally, remember to prepare a good and impressive business plan that comprises the structure of the business, your target, projections, documentation, sales plans, etc.

4. Diluted Focus

If you are spending too much on developing your product or developing too many products investors will question your ability to take them to the market. Spreading yourself across too many things reduces your chance of success and that is the last thing you want. As a start-up entrepreneur, you want to identify that one thing you believe in strongly and go after it. It’s a classic reversal of “Too many cooks spoil the broth”. In this case, it‘s too many avenues that lead to spoiling your chances.

5. You approach the wrong investor

The major mistake done by the startup is that they approach the wrong investor. Investors are not defined as someone with money. They invest because of their interest and knowledge in the space. It is like approaching someone with an interest in real estate with an offer to implement in a social networking startup. You should ensure that the investors should have the same interest and genres. As close an investor can be to the field, the higher are the chances of them investing. It is because they understand the space and it is easy for you to convince them.

6. Lack of focus

If you are not committed and focused on your startup, no investor will pay any heed to you. You need to have a proper track record and a focused approach towards your main goal. You want to be completely invested in your idea/startup. Split responsibilities is a complete NO and investors would not show any interest in partnering with you

7. Lack of marketing techniques

A good business plan, strong product, and dependent team does not necessarily result in being successful. In today’s world, you need to know the ways of capturing the audience’s mindset through innovative marketing techniques. You should know the right ways of hitting the sweet spot and rhyming it with the buyer's thought process. A structured and well-articulated marketing plan will boost up your sales and increase your brand value.

8. Lack of trust

Trust is the costliest thing in the world. Once you lose it you can’t get it back easily. You need to have trust in your team and your investors. The same applies to them while working with you. It takes time to build it and happens only once you spend time together. Make sure you build a team you can depend upon without any micro-managerial approach. The moment you have to go this route there will be friction and the team will start losing trust in each other. 

9. Lack of market knowledge

You are entering the market, but you know nothing about it. You don’t have information about your competitors, customers, regulations, documentation, and other key information. If you are not familiar with market regulations, this will discourage the investors. That is why make sure that you conduct proper market research before starting a startup. If you don’t have proper statistics and information about the market investors will stay away from you.

10. Poor projections

A smart entrepreneur is one who always has an eye on what’s coming next. If you are completely focused on the future you may lose sight of what is coming next and won't be able to plan accordingly. This will lead to a lack of foresightedness and you would not be able to show a bright future to your investors. Always, prepare a plan with future goals.

Conclusion

These are some reasons because of which investors may not invest in your business. That is why make sure to keep all the essential components in your startup. You can convince your investors by presenting your business’s bright side to them.


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