Startups are looking for money, and investors are looking for a business idea for financing. They could find each other. But startups for some reason often complain about difficulties in raising funds, and investors complain about the lack of ideas. In this post, we will tell you why investors sometimes hesitate to invest money and what mistakes startup founders make when looking for investments.

№1. Unsuitable investor

There are many investors in Europe and the USA, the competition is higher, respectively, investors are trying to focus on unique trading offers and stand out from the crowd. For example, it is now fashionable to finance projects related to artificial intelligence, machine learning, blockchain and cryptocurrency. Study the specialization of each fund and find the most relevant investor for your project.

№2. A product for a very small audience

Venture investors are looking for projects where you can get a return of 10x or more, and startups that are focused on a very narrow market and a small number of customers can only bring a small income to the investor. Startups designed for a small market can bring, depending on the size of investments, about 2x in 3–5 years. This is not very interesting for the investor. It is important for him to see that a startup has found its niche in a large market and will be able to earn big money in the future.

№3. The contrived uniqueness of a startup

Founders of startups often come claiming that their product has absolutely no competitors. During the meeting, we begin to search on Google and find competitors. An awkward situation arises. You need to know your competitors, to be absolutely transparent to investors, to know the strengths and weaknesses of your startup and competing businesses, to understand how the market is developing in general.

№4. Understaffed team

For investors, startup founders are important. They carefully study the founders of startups, look at their professional past. If your team lacks some competence, in particular commercials, then find the right person and make him a co-owner. Do not count on hired employees. They will not be able to give 150% involvement in your project as a cofounder.

№5. Lack of expertise

Many young people want to organize a startup immediately after university. They did not work in any company, and they have no experience and understanding of what problems may arise in a particular industry. In the absence of experience, there is nothing to worry about, but in order for the investor to believe that your product can solve the client’s problem, you should reinforce your idea with expert opinion.

№6. Startup just to get money

Investors often receive letters asking them to give 2–3 million dollars and promises of a profit of 10 million dollars after 3 years. It is worth behaving transparently and adequately with an investor. No need to draw a business plan, only to show it to the investor. Do business for the client, improve something, change the world. If you solve any problem of the client, then the investors will come to you.

№7. Lying

Most of all during pitches, the investor does not like when startups lie. Any self-respecting investor leads a CRM, where he records all meetings, all e-mail. When investors make a decision on the provision of investments, they raise all these records and see that some information does not converge. You need to be honest, transparent and consistent. If you have any problems, it is better to tell the investor about it.

№8. Not updating startup information enough

It is much easier for investors to decide on investments when there is a lot of information about the project, when they understand what stage the project is at, what problems and successes it has. If there is not enough information, then investors begin to doubt the honesty of the startup.

№9. Legal difficulties

The simpler the legal component, the better. The complex legal structure prevents the investor from making a positive decision on a startup. The company needs to register where your customers are. An investor should not have a question in which jurisdiction to invest money.