9 Solid Reasons Why Investors Won’t Invest in Your Startup

Two hands trying to meet for a handshake but 'no' is written in between

As an entrepreneur, you’ve put in a lot of time and effort towards making your startup a success. 

But when it comes to raising money for your business, you may be surprised to find that investors aren’t quite as interested as you thought they would be.

Why you ask. Well, the reasons can be many. Here are the top 9. 

1. Improper Cash Flows

When you are starting a business, it is important to have a proper cash flow management system to grow your business

This will help you understand how much money is coming into the business and how much is going out. 

If there is a mismatch between the two, then it may be hard for you to get investors. Because they will not want to put their money into a business that does not know how to manage its finances properly.

2. Lack of Marketing Strategy

Marketing and social media engagements is an essential component in any business venture — whether small or large. 

If you don’t have an effective marketing strategy for your company, then even if you manage to find investors — they will not be impressed by your lack of knowledge in this area. 

You need to have a detailed marketing plan that outlines what type of marketing activities will be conducted. And when they will take place so that investors know exactly what they are investing in and when they can expect returns on their investment over time.

3. Lack of Leadership Qualities

There are certain characteristics of a great founder and leadership is one of them. So if you lack leadership qualities, then investors will not invest in you either. 

Like any other business, you need to be able to lead people and make sure that they understand what needs to be done and when it needs to be done so that the project can go smoothly without any hitches. 

Therefore, we highly recommend you to read these: 

4. No Financial Projections

If you don’t have financial projections or projections on how much money will be made per month or year after starting up the business — then investors won’t invest.

This is because they won’t know if they would get their money back after investing in your project. 

This means that they might end up losing money instead of gaining any profits from their investment which is something nobody desires. 

Related: Why Cash Burn Rate Is Key to Sustainability & How to Reduce It

5. No Understanding of Your Competition or Industry

A lack of knowledge about how your competition works can be detrimental to your success as an entrepreneur. 

You need to understand how other companies in your industry operate so you can effectively compete against them for market share and customers’ dollars. 

Investors won’t invest in a company unless it has a competitive advantage over its competitors. 

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6. Demanding Inappropriate Funds

You see this in Shark Tank all the time. Investors won’t invest in your business if you demand inappropriate funds. 

If you demand too much money from an investor, they might not be interested in investing in your company anymore. 

Investors want to see that you have something to offer them before they give out any money at all. They won’t just give away their money without getting anything in return for it.

Related: 9 Early Startup Mistakes That Kill Your Business

7. Poor Financial Performance

If you have a history of poor financial performance, it will be very difficult to attract investors. 

In fact, if you have been in business for more than a year and have not made any profits, it is unlikely that any investor will want to put money into your company. 

Investors look for companies with a proven track record of profitability. If your company has never made a profit, this is not good news for potential investors.

8. No Market Need for Your Product or Service

Another common reason why investors won’t invest in small businesses is that there is no market need for their product or service offering. 

If there isn’t any demand for what you are selling, then there is little chance that anyone will buy from you – including angel investors and venture capitalists.

If that’s the case, we highly recommend you this article: Most Important Questions to Ask Yourself While Doing Market Research

9. You Don’t Have Any Business Experience

If you haven’t worked in business before or have no experience running a company, then potential investors may not believe that you have what it takes to run a successful business venture. 

To convince them otherwise, focus on providing proof that there are other areas where you’ve succeeded and learned valuable lessons along the way (e.g., academic achievements).

You can also hire a business startup consultant to help you figure out most of the problems you’ll face. And you’ll get support from someone who has got a lot of business experience. 

Summing Up

If you’re a startup that needs investment but can’t secure an angel investor or venture capitalist who will put money in your business, remember that it’s a big red flag to investors when your business idea isn’t novel and is easy to copy. 

Next, if you have no team or no proof, the fact that you have superb all-star credentials won’t cut it, especially if you don’t really have that all-star team or have any way to prove it. 

Finally, if you aren’t able to gain solid customer traction even with your own money (bootstrapping), investors will be less likely to give you money since they know that without customers there’s no venture capital return.

Please note that the intention of this article was not to make you feel that your venture is not going to work out. Rather, to improve it by avoiding mistakes and planning ahead of time.

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