Investing money in a startup might be a kind of a gamble. Your role, as an entrepreneur, is to convince the investors to bet on your horse i.e. your business. You have to show them that the odds of succeeding are good enough to back your project. Sometimes, however, even if they may find your idea interesting investors will be reluctant to support you. Here are few reasons why it might happen.
Your Business Plan is not Convincing
Creating a credible business plan is crucial when negotiating with a potential business angel. Any assumptions that you make must be based on some decent evidence. If you are showing an estimated profit that your company will make, be ready to give some realistic arguments why people will be paying for your product.
It’s too Early to Give you Money
An investor will not be waiting forever to see a return. You might have a revolutionary idea, but you have to provide proof that it will work. In the best case scenario shows a prototype of your product. Your potential business partner must see that you have a vision and you can deliver it within a reasonable time.
Your Presentation is Boring
Giving someone a 50-pages business plan filled with technical jargon is an easy way to discourage him from meeting with you. Your potential investor might not have a scientific background so give him some essential information about your company, highlight the problem your product is going to solve, why it is better than the competition and how it can be implemented. Many readers will make their initial decision based on this summary. Of course, a proper business plan requires a detailed technical documentation, but they can be attached to separate “white papers”.
Your Plan Seems too Perfect
You might think that your idea is so innovative and unique that it is simply destined to succeed. But this is rarely the case. Every business entails certain risks, and you have to show that you are aware of them. It is very unlikely that your business niche will be a blue ocean of uncontested space for growth. Carrying out a proper risk analysis will help you evaluate potential dangers. Investors have to be assured that you know that risks and are well prepared to mitigate them.
Your Team Doesn’t Seem up to the Task
Investors want to see that your team consists of talented people that are passionate about the project. If you can’t convince them that this is true, your chances for successful negotiation are weak. There are few common mistakes made in a team presentation – position names are not precise, bios are too long, your experience and credentials are not properly highlighted. Add some specifics about each person duties, create short bios with relevant information (3-4 lines of text), prove that your team is capable of executing the business plan and having what it takes to succeed. During the meeting let each participating member of your team talk and most importantly do not argue in front of investors.
These are the few examples of situations that may influence the decision of potential business partner. Avoiding them will increase your chance of finding someone that will support your business.