Whether you’re still in the starting days of your company or feel like it's time to expand, investment that provides large lump sums of capital for set percentage rates can be a tempting option to realize your dreams at last. After all, unlike loans with hefty interest rates whatever happens, investment generally requires you to pay pre-agreed amounts based on real profits alone. Not to mention that, as we’ve seen on Dragon’s Den time and again, the connections and expertise provided by the ideal investor can have a transformative impact on your success overall. The only problem is that, regardless of how many investors you reach out to, no one’s taking the bait the way that you might hope.
This is a surprisingly common problem that leaves countless companies either struggling to get by or turning to less lucrative and more costly forms of capital to get them through. What’s more, it leaves already struggling entrepreneurs out on their own without any of the broader benefits that investment can bring. Honestly, though, just as J.K. Rowling had to submit her manuscript for Harry Potter an astounding twelve times before acceptance, great business partnerships are never built in a day. As such, far from giving up your investment quest after a few refusals, you must reassess what’s going wrong, and what you can do to change that.
Luckily, even if it doesn’t feel obvious to you at the time, there tends to be some relatively simple reasons why refusal has haunted your attempts so far. To prove as much, we’re going to consider what those reasons are, why they’re a problem, and what you can do about them to increase your chances moving forward.
Mistake 1: Pitching to the wrong investors
Too often, the investors that you choose to pitch to are considered as an afterthought rather than a first response. After all, as long as you choose people with the right capital, surely your fantastic company is going to speak for itself? Or not. In reality, every single investor receives so many pitches that even seemingly endless capital repositories require delicate handling to ensure that money is spent in the right places. Furthermore, investors have a financial incentive to invest in companies that they understand and can thus provide the most valuable overall contributions towards. As such, blindly picking from the investor directory has likely seen you pitching to people with no incentive to invest, and not even any real knowledge of how best to do so. Keep this in mind by instead seeking investors who are either already entrenched in your business niche, already investing in semi-relevant companies, or simply possessed of the connections necessary to see your company through to fruition. Research is the best way to ensure these relevant pitches, as are industry connections and a general understanding of the investment options that you’re picking from in the first place.
Mistake 2: Failing to make an industry name for yourself
Far from what we see on Dragons Den, the vast majority of investment connections are informed by a friend of a friend, or simply the right connections joining the right dots to ensure lucrative partnerships. For the most part, this is yet another way for investors to cut through endless proposals and provides them with a more reliable opportunity to narrow down on applicable and profitable investments overall. Unfortunately, it also relies on your ability to network and become a name worth hearing before you make the mistake of reaching out and landing on the slush pile. Attending industry events, collaborating with relevant companies, and generally ensuring products that stand out from the crowd are, by far, the best ways to achieve this goal. Putting pride aside, it also doesn’t hurt to make your quest for investment known once you’ve already secured the respect of top industry names, making it more likely that investors will catch wind and get in touch with you. And, you can ensure that, if that happens, refusals will finally become a thing of your past in place of informed, lucrative investment offers that would never be possible if you were to carry on effectively cold calling every investment potential.
Mistake 3: A problematic plan
Regardless of who you know or who you approach, business planning that lacks cohesion, efficiency, or provable profit projections is never going to help you seal the investment that you need. In fact, if you can’t cobble together a half-decent plan for an investor who’s giving you their time, then you’ll quickly get a reputation as rude and unprofessional, instantly setting future prospects against you to make this pitch even more difficult. To avoid that, you must develop a complete and viable business plan as well as an understanding of how best to pitch that before you set foot in the offices of any investor. To be effective in this sense, a plan should especially focus on long-term success that proves how you can outstrip your competitors by considering everything from product development through to marketing drives and overall pricing strategies. All of which needs to come together in a well-thought-practiced pitch that proves your worth as an investment prospect without question.
Mistake 4: A business that won’t work without you
While the issues we’ve discussed so far are relatively obvious, there’s also a surprisingly common problem that gets far less airtime, and it comes in the form of putting yourself too firmly at the center of any investment pitch. The simple reality is that, though your pitch might seem like it’s coming from a personal place, investors aren’t putting their money in you. Rather, they’re seeking to invest in the long-term prospects of your company, which relies on you taking a step back in every sense of the word. Instead, you need viable proof that your company can easily survive and thrive if you ever decide to leave or even fall foul to injury/fatalities. Broadly speaking, putting the best possible team in place to protect the interests of your company regardless of what happens or why is the best way to ensure this, especially if they play an active role in your pitch and beyond. Skeptical investors may also require legally binding documents to this effect, including a buy sell agreement death clause that insures their investment against injuries or worse, as well as contractual assurance that their claim stays with the company rather than its owners. Only then are they likely to even come close to agreement on the capital that you need to make a true go of a company that can stand that test of time.
Mistake 5: A general lack of industry knowledge
A generalized lack of industry knowledge can also work against you considering that the less you know about your industry, the less able you’ll be able to tap into your crucial target audience or adhere to regulations and compliance issues that could otherwise lead to significant financial downfall. Beating your competitors is also dependent on your ability to understand industry standards, trends, and upcoming focuses so that you can always operate one step ahead and set yourself apart, none of which is possible without in-depth understanding and research. During an investment pitch, you’ll especially be expected to provide viable numbers regarding your niche market, previous industry success stories, and how you’re carving out a place for yourself here. More specifically, the better you understand your industry and your niche within that through everything from market research to trial and error, the better able you’ll be to develop a company on strong footing that you can then take into that investment pitch with you.
Mistake 6: An unrealistic request
If you’ve tackled all the above and are still struggling to receive acceptance, then the issue may simply be with the investment request that you’re putting forward in the first place. Demanding inappropriate funds that don’t necessarily align with your profit margins or capabilities is especially problematic, and is guaranteed to act as a red flag for any investment prospects. Instead, you need to make sure that, as well as pitching well, you’re pitching realistically. This means considering what your company is worth to an investor, where your strongest areas of growth lie, and feasibly how long it will be until you see returns from the improvements that you plan to put in place if you receive acceptance. All of this proves your worth in real-time and future projections, helping investors to see how much money they can afford to give you right now, and the realistic longevity/returns possible from this partnership overall.
A final word
Investment can feel like a slippery business slope that’s almost impossible to climb but, once you finally get your footing, this isn’t such a difficult goal to achieve after all. All you need to do is make sure that you’re avoiding these common investment fatalities, and ticking all of the boxes as a viable investment opportunity that no prospect in their right minds would be able to pass up.
