Why you can’t find an investor

Every few weeks I receive a question or two from an inspiring entrepreneur looking for an investment. Some of these brave souls ask directly for capital. Others ask for introductions to potential investors. Another group is looking for advice on how to begin fundraising. Very few of these requests come from businesses that are actually ready for an investment.

If you’re thinking about raising capital, ask yourself a few questions:

  • Have I built any value? Very few investors invest in a raw concept. If you’re looking for capital, make sure that you’ve built real, tangible value. Do you have a product? Do you have customers? How about revenue, or even better, profit? If not, your chances of landing capital are slim, especially if you don’t have an entrepreneurial track record. Ideas on napkins, business plans, and great ideas fail every day. The more immature your business, the less likely you are to find any traction.
  • Am I all in?  Shouldn’t you believe in your business more than anyone else? If you haven’t burned the boats and gone all-in, you probably don’t believe in your business enough to convince someone else to help get you started. Entrepreneurship isn’t for the faint of heart and it’s a high-risk play. Have you quit your full-time job to focus on the business? Did you sink your life savings and mortgage your home to fund startup operations? The risk you take needs to be commensurate with the risk you’re asking others to take.
  • Do I bleed humble confidence? Are you so convinced that your business is a winner that nothing will stop you from plowing forward? Good, that’s step one.  Are you willing to do whatever it takes – even admit you were wrong – to ensure that it doesn’t fail? Probably not. Very few people have the humble confidence to both listen and not listen to naysayers at the same time. That’s right, building a business requires such confidence that you can plow through doubt while simultaneously discerning which criticism is valid and using it to align for success.
  • Have I surrounded myself with scaffolding?  Are you a lone ranger or have you found advisors, clients, partners, and employees that believe in your vision and are as passionate about your business as you are? Many investors bet on people (the entrepreneur), but strong leaders attract followers and partners. If you’re the only person that believes in your mission and you can’t get anyone else to jump on board without raising capital, then you either have a poor idea or are not the leader that can make it successful. You need both before you look to raise capital.
If you’re looking to raise capital, I suggest that you do an honest readiness assessment before you start reading other blogs, reaching out, and exploring the fundraising process. If you can honestly answer ‘yes’ to the four questions above, then, and only then, will it be worth your time pursuing the answer to your original question. If you answer no, starting to look for capital will likely be a waste of time.

2 Comments Add yours

  1. Neil O'Brien says:

    Well put…I really like The point of the scaffoldng concept..where my difficulty lies is determining how much the investor should receive in return…probably commensurate with the risk. Perhaps it's time to solidify the plan.

  2. Neil, that's really an art, not a science. There are many ways to look at the question – pre-money valuation, investor return, and risk/maturity all play a major role. You can do research that will show you standard VC returns, but for seed capital and angel rounds it tends to be much more of an art and gut feel. I'll consider a follow up post that dives into the details. . .but I'm sure you can google and find that stuff elsewhere.

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