The financial capital to an early stage, high potential, growing Startup Company popularly known as venture capital has become a trademark for repute and standing for the businesses who receive it and a most sought after challenge for those who seek it or fail at it. Carrying a success rate of only 1-2% as venture capitalists grow more cautious about their funding choices, raising capital has become an uphill task for thousands of mushrooming startups which are in need of liquidity. While there seems to be no sure shot formula for becoming VC’s darling but certainly there are things you should abstain from doing to avoid your outright rejection. This article talks about the 5 possible reasons of why you might be rejected by a VC?
1) Only idea and no team
More than the idea, VCs invest in your team so instead focusing more on your idea, pitch about how you plan to execute it and who in the team assumes the responsibility of doing what? Your “I can do everything myself” attitude might not go well with most of the VCs. They would be interested in seeing colors from all hues so as to assure themselves that the company houses talent needed to scale up the business.
2) Too long pitches to bore
The presentation etiquettes hold a significant impact on VCs response. A classroom like presentation is most likely to get you a ‘no’ from investors. Hence it is important to thoroughly work up your presentation to keep it precise, engaging and meaningful. Aptly put by Woodrow Wilson “If I Am To Speak Ten Minutes, I Need a Week for Preparation; If an Hour, I Am Ready Now”. To know more on excellent presentation skill
3) No Focus On Business Building
Instead of fixing meetings with the VCs right after the launch of the company, work on your idea to give it a strong footing. Developing a prototype and doing beta tests to create demand and solicit customers is the right thing to do at the initial stages. If the idea succeeds in attracting customers then the chances of VCs investing the business increases manifold.
4) Incorrect valuation of the company
It is highly recommended to have proper valuation of your company in mind while pitching to the VCs. Looking at the valuation of companies with similar traction in initial stage can help you to get an approximate idea of the valuation. The correct valuation plays a very important role in deciding the funds needed for expansion.
Whatever might be possible reason for rejection of your plan by the VC but one thing that everybody needs to keep in mind to go long way is that “Even if we fail, we are still one step ahead of where we were earlier”.