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RedAlkemi Blog

4 Reasons why Investors won't Invest in your Startup

  • RedAlkemi
  • Startup
  • October 30, 2018

If you are reading this blog, you’re probably either looking for ways to get investors to invest in your start up OR you’re a startup owner who just got rejected a funding and are trying to figure out why investors won’t invest in your startup!

Either way, you’re on the right blog! We’re going to take you through some of the major reasons why an investor won’t invest in your startup.

As a startup owner, it’s natural for you to feel the need for an investment. You may have a great idea but not enough resources to execute it, and in such cases, people usually start looking for investors. But a lot of times, there are loopholes in your business plan or strategy that are unable to bring you any investors for your startup.

An investor, when looking to invest in a business idea or startup, is usually concerned about the return on investment. Getting a great investment requires both parties to agree to a certain deal and be happy with it. Most importantly, both parties should truly believe in the idea. An investor will never proceed further until there is uncertainty about the success of the business idea. Check out one of our blogs on how to measure the success of your business idea.

Still, you may wonder “How do I find an appropriate investor for my business idea?” Here are some tips you ought to know:

  1. Build and grow your network on social networking websites
  2. Consider online lending platforms
  3. Presence on crowdfunding sites

If an investor is assured of the success of your startup, it can definitely make things smooth for you.

Here are 4 reasons why investors won’t invest in your startup

Unrealistic aims

One of the biggest things that can risk your chance of getting an investment is having unrealistic goals or aims. An investor has dealt with enough businesses to understand if the goals that are set are realistic or unrealistic.

Being a startup, it is safest to set short-term and highly realistic goals. You should set goals that you know you will be able to achieve come what may. When you present your business idea to an investor, make sure that you are aware of its capabilities.

Being well aware of the capabilities of your startup or business idea can give potential investors the confidence to go with your business idea. It helps you come across as realistic – which sometimes – is all that investors are looking for.

Lack of experience

To be a successful entrepreneur you need to have enough experience of the business you are about to set up. You need to be clear on what business idea can succeed. You need to be able to put down ideas that will work and you know that because you have a certain amount of experience.

Too often, investors simply don’t invest in startups or business ideas because they think that the owner does not have enough experience. Whether it is experience in business, finance, managing a team, sales, or any other skill, the more experience you have, the higher your chances are of getting an investment. Having experience also gives the investor the assurance that your idea will most likely be successful and yield desirable results.

Lack of niche audience

If you’re reading this blog because you’re trying to get a funding, we bet this point didn’t even cross your mind!

Not having a niche audience for your business product or service can be one of the biggest reasons an investor chooses not to invest in your idea. This is because having a niche audience is crucial to having a successful business. Think of some of the most successful brands and businesses out there. They may seem like they all have generic audiences, but if you look closely, all these businesses have defined, niche audiences for their product or service.

So, having a niche audience for your business will ensure more chances of getting funded. It will also give investors that idea that you are highly familiar with your niche audience and have a product or service that is meant to solve specific problems faced by specific people.

Business idea

More often than not, investors choose not to invest simply because they do not believe in or trust your business idea. To come up with a successful business idea, you need to do a thorough market research and see what the requirement of the niche customers is. Based on your assessment, you should come up with your business idea that is beneficial to both you and your audience.

Sometimes, a business idea may be interesting or unique but may come across as risky to an investor. So make sure that your idea is sustainable and well thought out before you start looking for an investor to invest in your startup.

If you’re a startup owner, we hope this blog helped you understand the various reasons why investors choose not to invest in an idea or startup. We hope you take these points into consideration before you pitch to investors! If you think we missed out on any points, let us know in the comments below!

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