The last couple of years for new business entrepreneurs has felt a little like an old episode of the Oprah show - you're getting funding, and you're getting funding! The high point was 2015, which broke the record and broke the bank when it came to investors backing growth companies. And while the year since has slowed (or simply receded back to the norm), there's still a very healthy market for new ideas and money available for founders.
So why isn't your company getting a piece of the action? If you've left your fair share of VC board rooms with your head slung low, you might start to think your product or service is just not as revolutionary or disruptive as you thought it was. Or perhaps the investors just "don't get your vision." What's really going on though could be a matter of preparation or presentation, two things that are firmly within your control.
See if these three common roadblocks to securing VC funding sound familiar to you.
1. You've set the bar too low.
The funding process can get discouraging at times. There's no reason to sell yourself short by tempering your own expectations before you go in front of investors. Or even worse, outwardly apologizing to VCs in pitch meetings for your own perceived shortcomings. Setting a low bar can take a couple of forms.
Most glaringly, small businesses often either undervalue themselves or miscalculate the cost of growing a company, resulting in an investment ask that's far too low. Nearly 80% of failed businesses acknowledge that they started out with too little cash to weather the unexpected storms on the way to maturity. Some of that comes from not understanding the market well enough, but part of it also stems from a fear (or embarrassment) of asking for too much.
Many companies also aim far lower than the moon when thinking about what their idea can ultimately do or accomplish. Founders can become so preoccupied with the product or service itself that they lose sight of an overall company mission and reason for existing in the first place. Investors also hear "sorry if this idea has been done before" or similar self-defeating talk during the pitch.
That's probably true anyway - not every idea can be a wholly original disruptor - but investors don't care. They want to see that you understand your audience and have confidence in your company.
2. You're blind to your competition.
Investors have a seen a presentation or two in their day. Heck, chances are they've seen a presentation very similar to yours literally a day earlier. If the people making the money decisions are well-versed in your industry, you better know your market inside out, upside down. Saying you have no competition or you've carved out a wholly unique business won't impress VCs; in fact, it will probably have the opposite effect.
The more you do your homework on other companies in your space, the better you'll be able to forecast your own growth. Sure, you may have a component of your business that's unique, but you'll be going after a similar audience as someone else, so pay attention to what your competition does that works and that fails. That way you know how to position your unique selling proposition and better disrupt the market.
Knowing the competition also clues you into where your money will come from. Customers will treat you as a replacement, a productivity enabler, an impulse buy or something else relative to your competition - knowing this is key when deciding how to attack the market.
You should always fiendishly follow industry trends. Otherwise, you'll either parrot someone else's idea directly or you'll exist in a space where no customer is looking. Investors aren't looking for founders who exist in a silo (or live in a metaphorical cave), so the more aware you are, the better prepared you'll be to impress VCs.
3. You lack founder horsepower.
Simply put, how much energy do you spend obsessing over your business? How quickly can you find the right person to fill a need in your growing organization, and conversely, how swiftly can you recognize and remove someone who may be standing in the way of success? VCs aren't funding an idea so much as they're investing in you early on, so how well can you make them believe in your ability to execute on the business?
The hard truth for many entrepreneurs is that the people they've surrounded themselves with during the company's formation may not be the right people to nurture its growth. The founder/co-founder relationship is the most important one in an early-stage company, and while a certain amount of disagreement can be healthy, dissension among the top ranks can quickly spell doom for your funding chances.
Investors will be looking to see if you've surrounded yourself with the right people. Aim big from the beginning by looking to hire people that might even be over-qualified for the current stage of the company simply by getting them to buy in to your vision. Always seek to create an unfair advantage in your market by creating a team that's long on business and industry experience. Learn from the best and never put yourself in a position where you're always the smartest entrepreneur in the room.