Many investors, especially those who invest professionally, say “no” to the vast majority of startups they see. In this case, that rejection rate could be as high as 99%. So, why do investors say No?
At the CSUF Startup Incubator we work with our residents to figure out this part of the startup puzzle. Some startups need financing right away, others will need funding to grow, and then there are other startups that won’t need any funding.
But why do investors say no to startup founders? Here’s a list from a TEDx video featuring angel investor Alicia Syrett:
- Founders don’t do their homework and pitch investors who don’t normally invest in their kind of business either because it’s in the wrong stage of growth, wrong industry, or something else doesn’t fit
- Investors who get an investment recommendation from someone they trust are more likely to hear that pitch
- Investors are turned off by founders that don’t have a good moral makeup; most investors will do background searches on the startups they are thinking of funding and if they see red flags they will be less likely to invest
- Founders need to effectively communicate why the investment makes sense and how that money will be used; if a founder comes off too salesy or wants to use the money for things that won’t directly contribute to the growth of the company then investors will usually pass
- Investors are looking to invest in startups that have a huge upside, have defensible business, have some traction (i.e. customers), and have good financials
- The last thing that Alicia talked about was how investors do make mistakes. You can do everything right but still not receive an investment. In that case, your options are 1. Move on to something else, 2. Keep on working to raise capital, or 3. Bootstrap the business and figure out how to grow it without outside investment.
Overall, this was a tremendous talk. Less than ten minutes and it answers many of the important questions that entrepreneurs have about raising money. Watch the whole talk below.
CSUF Startup Incubator
Entrepreneurs who are accepted into the CSUF Startup Incubator work with our entrepreneurial experts over a six month intensive launch period that includes: access to office space, quarterly investor pitches our entrepreneurs can participate in, free events, a dedicated one-on-one coaching relationship with one of our more than 700 startup experts, and so much more! If you are ready to learn the right way to go from concept to launch, please go to this page or contact a CSUF Startup Incubator representative at firstname.lastname@example.org.