Aidi — Why Startups Don't Get Funded

Every year, thousands of startups worldwide are launched with ambitious goals and hopes of securing funding to pursue these goals. However, despite the passion and innovation that founders bring to their industry, only a small fraction of them are able to successfully secure the funding needed for their businesses to thrive. For some founders, the journey of securing funding can be very laborious and frustrating, thus, forcing them to shut down the business only after a few years. How is it possible that some businesses are able to get funding easily, while some aren’t? What are they doing differently?

In this article, we will be exploring some of the reasons why investors may decide not to fund a startup and what founders should pay attention to to improve their chances of attracting investors.

1. Poor Market Demand: In as much as thousands of startups spring up yearly, hundreds of them do not address real problems with significant market needs. One of the things investors pay a lot of attention to is the market size of the product. If the market size is too small, investors will shy away. Investors need to be convinced that there is a significant market for your product/services and that there is a potential demand for your offering. One way to convince investors to commit to your startup is by validating your idea through market research. With valuable data and insights from market research, investors can evaluate your market opportunity and decide if your business is worth investing in or not.
2. Weak Business Model: Having a good market opportunity is not enough to convince investors to invest in your business. You must also have a strong business model to show investors plans for user acquisition and revenue generation for the business. Having a good business model convinces investors that you know what you are doing and that your startup can generate sustainable revenue. If your business model is poorly thought out or cannot show clearly how the business plans to grow in the future, investors will never fund your business.
3. Overambitious Projections: Overambitious financial and growth projections are a major turn-off for many investors. While it is good to believe in your startup’s potential, it’s also important to not provide unrealistic projections. Investors have been in the business for a long time and can tell when a business has the potential to meet a certain target or not. While they expect to see future projections to know if they will be getting value back for their money, it is good to be honest and not set unrealistic expectations. Set realistic and reasonable projections based on thorough market research.
4. Dysfunctional Team: A startup with an inexperienced or dysfunctional team is very unlikely to get funding from any investor. Investing is a risky business and investors want to ensure that wherever they are committing their money to, there are people who are responsible enough to manage it. If your team lacks the necessary skills, experience, and knowledge to execute your vision, investors will not fund your business. Hire a team of professionals who have relevant experience and can complement your team in bringing your visions to reality.
5. Lack of Focus: Investors can easily identify a ‘Jack of all trades, master of none’ by reviewing your business model and strategy. A business trying to tackle too many problems at the same time can appear unfocused and desperate to make money fast, rather than being patient with their growth process; and you can already tell, red flag! Rather than trying to solve too many problems all at once, it’s better to focus on one problem or product, have a clear strategy, and see it end to end before venturing into another. This shows investors that you are focused and have a focused strategy for growth.
6. Poorly Designed Pitch Deck: Your pitch deck gives potential investors a first impression of you. If you cannot take the time to create a well-detailed and visually appealing pitch deck, what makes you think any investor will want to commit to your business? Your pitch deck should be easy to digest, clearly showing investors what they need to see, and should be captivating as well to keep them interested in your product offering.
7. Wrong Timing: If you have all these boxes checked and you’re still not able to secure funding from investors, you may also want to consider the timing. Sometimes, the inability to get funding for your business might be because the market is not ready or some other external factors. What to do in this case is to bootstrap for a while and observe market trends and conditions to know the right time to raise funding. 

Fundraising is not as easy as it appears. The funding phase comes with its pressures and expectations, and as a founder, you need to ensure that you, your team, and your business are ready for seed funding before raising capital. Addressing these problems listed above can improve your chances of attracting investors and getting your business funded, giving you more opportunities to grow your business.