The Most Common Reasons that Investors Say "No"

July 22, 2014 by Christine

The success of many small business start-ups hinges on their ability to successfully obtain capital from investors. Capital that is seed money to accelerate growth. As you prepare to make a pitch to potential investors, there are certain areas to which you should pay greater attention to maximize your chances of a successful bid for money.

Here are some of the most common reasons that investors say “no” to start-ups looking for some cash to get off the ground:

1) Poor product quality

Be very honest with yourself when you're evaluating your start-up before you approach investors. Would you pay money for your product rather than going to an established competitor? Is your product different enough from similar items to be able to carve out a niche in the marketplace? Would your product offerings be well received without you in the company? If the answer to either of these questions is “no,” then chances are strong that investors will feel the same way.

2) A lack of a well thought-out business plan

If you have any plans of surviving as a business, you need to make it clear that you have put together a detailed strategic plan that will guide your company toward success. You should be able to demonstrate how you will penetrate the market, how you will get the attention of the public, how you will market your product and how you will convince people that your product is worthwhile.

3) A lack of a demonstrated history of growth

You should already have some growth momentum before you approach investors. They want to see that you've been able  to achieve a certain level of success so far before they put their money in your brand. You should also have a clear plan for scalable growth so that in case your product does take off, you'll be able to effectively manage that growth.

4) A product that will be in an already saturated market

You could have a high-quality product, but there might just be no room for it in the current marketplace in the eyes of investors. The more competition there is within an industry, the harder it'll be to convince investors that you have a product worth placing their faith in.

5) A lack of adaptability

You should be able to demonstrate to investors that you will be able to recognize market changes as they arise, and be able to adapt to them as well as or better than the competition. Therefore, it's important to make sure you have a place in your budget reserved for research and development.

Want more tips on how to impress investors and improve your chances of successfully getting capital support? Contact Viral Solutions today!

Watch out elephants! This slayer of business challenges comes with 30 years of record breaking sales, marketing, operations, training and leadership experience . He has worked face-to-face with 100’s of small business owners as well as large firms. His love of creating, communicating, developing and executing results for clients shines with each project, publication and training event. His entrepreneurial spirit, passion, industry experience, education, problem-solving prowess, charismatic personality and been-there-done that attitude leads his client focused approach.

Filed Under: Analytics Tagged With: growth, Momentum