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5 Reasons VCs Won’t Invest in Your Business & How to Slay The Dragons
Posted on 9th February 2017 in Business
Written by James Marren
If you are thinking about looking for investment or (you) have recently been passed over by investors, here are some of the potential reasons why. In this blog, we aim to share our experience of talking with hundreds of business owners and the feedback they have received from the process of seeking investment. It’s not an exhaustive list by any means, but it’s a useful checklist to make sure you are addressing some of the main reasons behind businesses missing out on VC funding.
1. Does your business really have a USP?
Can it be defended against your potential competitors? Is there something about the tech, process, relationships you have, that means others will find it hard to replicate? If not, any success the business starts to get will immediately attract a growing number of competitors that could eventually lead to your business’s downfall. Competitors would have time to wait in the wings observing and testing out your product to improve it. Investors could be fearful that early success could still result in a tragic downfall. First-mover advantage is one thing, but it didn’t help Myspace much in the end…
2. Know your competition
Not having an in-depth grasp on who and what your competition is, will be another red flag for any investor. It indicates that you can’t have thought comprehensively about how you want to position your product for the target market. You should know what differentiates you from the current solutions out there and which markets and methods of selling they are using. It’s not a VCs job to do this for you, they will expect you to present them with a detailed break down of your competition and your plan of action if you want their investment.
3. Know your numbers
If you walk in with messy spreadsheets and you are running on desktop software, it doesn’t look like you prioritise the figures or are data driven. FUTRLI syncs and updates daily with your cloud accounts package, to create beautiful looking rolling Forecasts. These operational forecasts are your security blanket and they should be the pulse behind every decision you make. If you can show you have thought through several scenarios and you have a sound process in place for regular monitoring, this will speak volumes to an investor. If you want some serious brownie points, stress during your pitch that you want them to feel like part of your team. With FUTRLI, you can invite them to view and collaborate on your figures. This will give your backer complete transparency of their investment. Together you can decide their access-levels and control what information they want to see on a daily, weekly or monthly basis. Also you will be able to sell this idea even more by the fact that this information is designed to be easily accessible for them to work from wherever they are.
4. Go big or go home
Have you ever watched Dragons Den in the UK or Shark Tank in Australia, and seen how badly it goes down when the business owner pitching reveals they‘re unwilling to invest their own savings? Duncan Bannatyne, one of the UK dragons, jumps in to say something along the lines of “Why should I give you some of my children’s inheritance when you won’t even put up your own money?!” VCs want to see 100% commitment to your company and that you are willing to fight to the death. That may sound dramatic, but experienced VCs know that this is often the difference between a decent return or never seeing their money again.
5. Find your best scalable marketing channels
VCs like to invest in businesses that have begun to identify their best scalable marketing channels, so they know any capital invested will be utilised optimally. This gives confidence to investors that their investment won’t just be burnt through during an initial experimental/testing stage seeking them out.
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