Capital is a key ingredient for starting or growing a business but raising money can be challenging, as any entrepreneur knows.
With fierce competition in the startup space in India, enterprises are born daily and venture capitalists sit through hundreds of pitches each week. Here are four common reasons that could make investors hesitate with injecting funds into your small business, and how you can resolve these issues to improve your chances of raising capital.
One – You’re delivering a less than perfect pitch
Your pitch is often the first impression investors make of your venture and delivering a bad one can mean missing out on a callback. Why do pitches go wrong? Often times it’s a result of the simplest mistakes, such as using too much technical jargon, a lack of crucial details, nervousness when presenting, or just being uninteresting in general.
Investors, or venture capitalists (VCs) have to sit through multiple presentations; so being concise and able to answer any questions thrown at you is key. Besides capturing your listeners by using narrative and emotion, focus on the benefits of your company and highlight why you are passionate about the problems you are aiming to solve. Don’t be afraid to ask your audience questions in turn, it will give you the chance to flesh out technical details that they may be unsure of and create a strong impression about your level of knowledge and experience. Lastly, do some research on the parties you’re talking to so you have some background knowledge on which to build rapport.
Two – You’re not showing business traction
VCs are less likely to fund unproven businesses if they can’t see that they’ll be getting a reasonable return on investment. Demonstrate how you are generating customer interest, which could mean showing evidence of pre-orders or sales. If you’re not up to this stage, explain how you plan to sell your product by outlining your distribution, marketing and sales strategies. This reassures investors as to how you expect revenue to come in.
Three – You’re not analyzing risks
Investors want to hear that you’ve considered the risks to your business and are taking precautions to mitigate them. Forgetting this step could give the impression that their potential investment won’t be in safe hands. Some risks to analyze include market, technological, legal and operational concerns. When you identify potential issues, plan how you will address them and make sure you present the information to investors in a way that highlights the steps you’re taking to guard against risk of failure.
Four – You’re ignoring your competition
Almost every business has competitors and not acknowledging them can make it look like you don’t know your market. The way to identify competitors (if they’re not obvious) is by looking at the needs your product fills and considering substitute products that address them.
When investors ask about competitors, tell them how your product is different, considering things like pricing and technology. This will demonstrate that the competition isn’t a threat to you and why your venture has all-important advantages.
Knowing what turns investors off can help you turn your business into an attractive investment proposition, whether it’s by building traction, getting to grips with risks or honing your pitch. If you have experienced any knock-backs, don’t be disheartened. Instead, use these to your advantage and find out why someone didn’t invest. The sooner you know, the sooner you can fix the problem.
To read more about other common issues business owners face and how to solve them, click here.