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4 reasons investors may hesitate to inject capital in your SMB

3 min read

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  Youre 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 its 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. Dont 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 youre talking to so you have some background knowledge on which to build rapport.


Two  Youre not showing business traction


VCs are less likely to fund unproven businesses if they cant see that theyll 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 youre 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  Youre 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 wont 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 youre taking to guard against risk of failure.


Four  Youre ignoring your competition


Almost every business has competitors and not acknowledging them can make it look like you dont know your market. The way to identify competitors (if theyre 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 isnt 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 its by building traction, getting to grips with risks or honing your pitch. If you have experienced any knock-backs, dont 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.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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