There are quite some prominent reasons to why any investor would quit investing in any entrepreneurial activity and here i explained 14 Reasons Why Investors Won’t Invest in Your Startup business.
Entrepreneurial activities are associated with a series of benefits, and creative ideas which attract large strata of people towards them. The other proportion of people who do not show much anticipation in this respect are the ones who are well familiar with the impacts and consequences as well. If entrepreneurial activities call for remunerations, they also call for having an eye on the consequences as well, as everything has its benefits and disadvantages as well.
Entrepreneurs are particularly most willing ones to have the risk in their businesses. They do not properly obey the same rules as most of the businessmen do and many times this attitude let them set up amazing businesses that start as a small start-up but then becomes a giant company.
A lot of things make them different from the regular or mainstream businesses but investors have to worry about the money and it’s hard to digest new ways of working because of risk hence it waves away investors believe and theories on the entrepreneurial activities.
The mainstream business techniques are very well evident and almost known by all but the captivating part is how an entrepreneur handles his business with different tactics and techniques which makes every other investor clueless of what they are going to do. The investors then ultimately have a fluctuating belief on their investment in any entrepreneurial setup. The fluctuation is quite evident because they do not want to lose their money and benefits working with the entrepreneur.
Here is list of “14 Reasons Why Investors Won’t Invest in Your Startup business” and you need to avoid these mistakes when presenting your idea.
- Lack of Experience
- Poor Niche Identification
- Meagre at Managing Finance
- A Dearth of Convincing Power
- Cookie Cutter Ideas
- Surplus Creativity
- Truncated Risk Management
- Corrupt Morals
- Not Up-to-Dated
- Improper Team Management
- No Following Business Models
- Dodgy at Handling Suggestions
- Stumpy Work Quality
- Not Understanding the Industry
Lets go in more detail on the above listed reasons.
Lack of Experience:
The primary most reason to disobey the rules of investing in any entrepreneurial setup can be the lack of experience that has the most vital factor to run any set up with low risk. If the entrepreneur is not properly aware of the business and model of working or the processes from manufacturing till delivery, he/she may be running out of any investors because in such cases the risk factor is high along with that the low margin of setting a valuable place in the market.
Being aware of what you need to do and how you need to do is very important. The experience in your field of work, what you have been learning and implementing in that particular time period makes the most of income for you. The more you are experienced, the more knowledge you will have.
The experience here does not indicate the witnessing of processes solely. It is the self-implementation of processes to have a better understanding of what you need to do, how you need to control the circumstances and deal the changing factors along with competitor in the market.
Definitely, observation and learning through the happenings around plays a part here, but not as much as an individual running his business following some rules, techniques, and tactics prescribed by some other experienced one.
Poor Niche Identification:
The second most evident reason to quit investing in an entrepreneurial set up is when you realize that the entrepreneur has not identified the niche properly. The utmost priority when you introduce any setup is not you, but the customers. If you do not look for what they (the customers) require, you are either doing it for yourself by making it the mainstream business as other businessmen do, or you are out of any creative ideas for people to get your product both of the cases are a big drawback for any investor because the idea may flop soon and investor`s money is at risk.
Nevertheless, people only look for the products that are Bit different, High Quality and Attract them. To be an eye opener for the investors, you should be having a whole lot of knowledge on what public demand and how you are going to present them with your product and service.
Meagre at Managing Finance
If you have been terrible in managing your previous finance, the investors will definitely save their money by not investing in your setup. Finance is what we call the backbone of the business. If the backbone is not doing well, the whole body cannot function properly.
If you finance your business yourself, you need to generate the most of income to see a prominent increase what you invested and what you have now. And obviously, the outcome should be bigger and better. If your business is funded by any individual or any party, you undergo a lot of pressure of generating your income to a level where you witness benefits as well as the money that you need to return to the individual or the party.
The history of your business speaks for itself. If it says that you have been in debts, why would any investor be attracted towards you? The vigilant and careful steps towards making your business grow will appeal the investors towards you.
A Dearth of Convincing Power:
If the investor shows any interest towards you, either it is your work or your words. The most important are your words anyhow. If in any case your setup is not doing well, you are only left with your words to convince the investors. Your words play the most significant role in convincing that how you are going to make the most of it in your business.
If you explain to them how your business is going to do in the future, what are your goals and how you are going to take it to the next level, you surely will take achieve his trust.
All you need to do is get the investors trust you by elaborating the product and the service and how the product or service was different.
Convincing power is more required when you have shifted your idea to something else or your way of working is different from that currently present in the market because in such cases investors become impatient.
Cookie Cutter Ideas:
If the entrepreneur tries not to come up with the same idea and portrays some other person idea, the investor would never invest in his business until and unless it is having something new in terms of a marketing idea, back lane services, a network of suppliers etc.
Sometimes identifying and coming up with the newest of idea makes investors come towards you but majorly investors consider whole new ideas as a big risk. Many times new ideas seem so attractive and productive but fail to meet the market need because of their extremely futuristic concept.
The preferable way is to mix existing ideas or modules with something new or add your totally new ideas with currently working domains of the market to first create the demand of your product or concept among the people to convert them into customers. Rather than copying any idea, it is ideal to be creative yet being less risky.
As already mentioned, the entrepreneur should always come up with a change in the already running concepts. If the idea that he/she has come up with is not supporting change or if the idea is mainstream and no change in the product or service (which is already present in the market) will be seen then the investor will surely not invest in the set-up because people will prefer the currently available brand in the market over a newbie.
The investor needs to be made sure that the product that you are offering is not only creative but different from anything that is available on the market. He needs to be explained why YOUR product is going to be acceptable and more and more people will fall for your product or service. If he gets your trust, you already have his investment in your setup.
Truncated Risk Management:
If the venture capitalist feels that you are not a good risk avoider and you are not competent enough to handle any risky situation, he will be pretty indecisive to invest in your business. On the other hand, if you strategize well, or you come up with tactics that prove you to be not only competitive but also a fast learner and quick situation fixer the capitalist will surely feel that his money is in safe hands. Avoiding risk is the crucial most part of the business as it makes you learn the most and you will certainly avoid any other risks by learning through it. Whereas if you avoid them with your sharp mind, you can get any investors attention.
To avoid risk factors a strong research about the market, audience, competitors and proficient ways of working is very essential. It let the entrepreneur initialize the place of idea or concept in the market and also helps to convince investors. On the other hand investor`s find this well aware attitude considerable to continue investment.
As a businessman, you need to associate yourself with a lot of people around you. Even if you do not talk or associate that much still you need to make connections and links with people because you not only can need them in any time and also they will spread good and wise words for you to people.
Word of mouth matters a lot and if the acquaintances or the peers make the word of mouth best, financiers will agree to work. Investors in the market are not only limited to you. They investigate properly before investing in you and the word of mouth works there. The links and connections that you have made with people will speak for themselves. If the connections and associations are strong, they will a good word of mouth to the investors and they will surely get impressed. Elsewise, only your bad pictures will be communicated to the venture capitalist and the other people in the same market which will only let you down.
If in any case you will be found guilty of being corrupt and morally upsetting, people will disseminate that in the market. A bad reputation will actually let you down while making the best of your income whilst being loyal creates good word of mouth and investors will surely look for the ones who are seen doing well.
It is recommended to investors that no matter how big amazing the idea or profit is, the unfaithful and corrupt person will not bother to ditch. The reputation in the market comes up with good communication, fine results, and high moral attitudes, which are very essential for partnership or investment plans. The one who has a corrupt reputation is actually the one who is lacking in these key factors.
Everyone in the market is there to provide the clients with quick services to fix solution. If the industry offers you swiftest of solutions, then you as an entrepreneur needs to come up with the effect most solutions and technology. If you are about to start your business, you need to come up with the most efficient of the technology to attract people towards you. If you fail to do so, not only the clients but the investors will also, choose someone else over you.
The up gradation of everything that is included in your business is important because people look for better options regardless of what is ordinary and already present around them. You need to channelize the investors with the different cognition of yours through providing him the evidence that you think out of the box and you have better options for people than others. You need to let venture capitalist think that you can provide people with the best of your product or service which is very up to date and how it is going to fascinate people. An up to date system benefits to utilizing resources at maximum level hence profit margin is high.
Improper Team Management:
When running business processes, you always need to take your team with you. The outcome is the hard work of your team and not you solely. If the investor points out any flaws in the way you treat your treat, he will choose someone else over you definitely. The outcomes you get are the efforts made by all of them. The tasks that they do ultimately prove to be a plus point for you. Their efforts make the worth of your business. If you are failing to handle them properly or supervising them effectively, you will be out of investors. Your team does not only need your strict supervision side but also it needs your attention to appreciate them, to correct them, to suggest them good. Obviously, supervision is very important. If you as an entrepreneur keep a strict eye, you will make them follow the instructions properly.
The blame game and attitude of the individual game player rather than as a team player makes the investor think that entrepreneur is more in love with “I” hence they end terms of working. Impact of smart team attracts investors more and the attitude of dealing the team as a leader, not a boss is preferred because in case of success or failure as the head of the start-up you will not be accepting other`s efforts and your mistakes.
No Following Business Models:
The investors are investing their money in your set up which is having their stake in your business. So they will eventually dig out all the details about your company very well. The business model or business plan is the indication of how your business is very important for you and you are strategizing for success along with smart risk management. The business model is the identification of the future steps and how you are thinking about the long-term business planning.
It portrays your seriousness towards your goals and tells how passionate you are about making your business growth. The importance of a business plan explains how the entrepreneur should be pre-planned about the progression of his business. Not only the business plan but the SWOT analysis also the utmost chunk of the prerequisites for initiating any business.
If you are well aware of the weaknesses that you have and the strategies to overcome them, and the ways to look for any opportunities and how to responsibly fulfil them, the strengths that you have and how you are going to use them, and the threats that you may be going to face, then you are ready to go a long way. It is the same what the investors believe. You need to be well prepared for anything that is going to come in your way.
Dodgy at Handling Suggestions:
The financiers are obviously the ones with the funds and you, in any case, need to listen to what they say if you need the funds. The suggestions and the recommendations that are coming from them should be thoroughly acknowledged by the entrepreneur because the investor is already an experienced person and is investing in us. First of all, if he rectifies or suggests anything, it is because he has a stake in our business process and a right to participate in activities. Secondly, he will not do any harm because his money is involved in the process, if he tries to do bad too, he will lose his money as well. Thirdly, he wants to generate a proficient rise in income, so he will be provided back with a handsome amount of money. If after understanding all of this, the entrepreneur still makes any debate in front of him, acts derogatory or if he/she handles rejection very poorly, he will be having least chances to have his investors happy to invest on his business or even invest in his business.
In case entrepreneur wants to discard the suggestion there should be a solid reason presented with research and a better idea. The investor will surely hate that you discard his opinion just because you don’t like it.
Stumpy Work Quality:
The quality of the work is the main reason the investors will choose you. If the quality lacks, then you are not going to see any investors near you also your image in the market will seize the opportunities for your startup. You, as an entrepreneur, need to make the struggle to have the best of the quality of your products and services, so that you may gain investors trust along with client`s reliance.
Obviously, people prefer quality and if that will be the missing factor in your product or service then people will be going to avoid you and prefer any other product or service. The investor’s money is also going to get waste if the quality defines itself to be poor. So in any case, he needs to make sure that you not only present good quality in your product or service but also you are assuring and guaranteeing it to be the best.
Not Understanding the Industry:
The businessmen do not only need to have a knowledge about the business processes only but also the environment as well. The understanding of the ambiance where you are going to work is very important. You need to know the people that you are working with, your acquaintances. The industry that you are working should also be properly acceptable to you and your business. If the investor notices any differences between you and the industry, he will not invest in your business whatsoever. Either you should adopt the rules of the industry or make them acceptable to you.
Concluding the reasons with the simplest of remedies that an entrepreneur should do, that are he should be acceptable of the critiques by the investors, as they are investing and it is their money that he will be getting. He should be loyal towards his job, always striving to learn more whereas looking for better opportunities to get more and he should strategize best to avoid any risk and to get the best.