Summary

The article discusses common mistakes startups make when trying to attract investors, emphasizing the importance of realistic funding requests, clear and concise pitches, and emotional connection.

Abstract

The author, Eric Fung, a tech enthusiast and co-founder of Globalify, shares his insights on why startups often fail to secure investment. He outlines four critical errors: asking for an excessive amount of money without demonstrating revenue, overwhelming investors with too much technical detail, rushing through the pitch without establishing a personal connection, and failing to quickly engage investors emotionally. Fung advises founders to seek smaller, phased investments, tailor their pitches to the audience, and craft a compelling narrative that resonates with potential investors. He emphasizes that securing funding is not just about the idea but also about how it is presented and the founder's ability to build rapport with investors.

Opinions

Asking for a large sum of money without revenue proof is a significant deterrent for investors.
Startups should request funding based on their 18 to 24-month needs rather than long-term projections.
Pitches should strike a balance between detail and clarity, avoiding excessive technical jargon.
Founders should focus on building an emotional connection with investors through personal stories and the 'why' behind their startups.
Investors are as interested in the team and founder as they are in the business idea itself.
Refining the pitch and learning from each investor interaction is crucial for success.
Founders should not underestimate the power of a well-crafted narrative in their fundraising efforts.

My Top 4 Reasons Why Startups Fail to Attract Investors

A founder’s perspective on what really matters

Starting a startup is like setting off on an exhilarating adventure filled with highs, lows, and countless learning experiences. As a founder, securing funding is one of the most challenging and crucial tasks. No funding, no team, no dream. You’ve got this fantastic idea and a plan to make it a reality, but there’s a catch — convincing investors to believe in your vision as much as you do.

If you have the cash saved up, sometimes bootstrapping and hustling is the best way. That's how I feel, at least. Navigating the world of startup investments can be a maze, especially when you face rejection after rejection. It makes you wonder, what’s going wrong? Why do most investors decide not to fund? They receive more than 100 decks a week, and they only decide to listen to 10 of these pitches, and then possibly ONLY fund 1 or none?

As I went through this journey, I realized it’s not just about having a solid idea; it’s about understanding the mindset of the investors, their expectations, and the common pitfalls that many founders, including myself, have stumbled upon. Let’s dive into some of these key lessons that reshaped my approach to securing startup investments.

1. Asking for Too Much Money

When Steven, a startup founder, asked for $4 million without any revenue, it was a big leap for investors. They want to see sales first, proof that the business is working. Steven’s case taught me that asking for a huge sum without showing results is a red flag for investors. It’s better to ask for what you need for the next 18 to 24 months, not four years. So unless you have some REAL traction, gotta be realistic. I found that if you are not generating revenue, start with a pre-seed or angel round instead of jumping directly to a seed round. When I changed my approach in my current startup, asked for less, showed a plan for quick growth, and got funded quicker!

2. Too Much Detail in Your Pitch

I used to think the more details I gave, the better. But investors’ eyes would glaze over. They’re looking for a balance — enough to understand your product, but not a deep dive into every technical aspect.

It depends on the analyst or people you are pitching tbh. By trimming the technical jargon and focusing on the impact, another startup I know managed to keep investors engaged and successfully raised funds.

3. Speeding Through Your Pitch

Investors are betting on you, the CEO, the team. They want to understand who they’re investing in. I learned that racing through a pitch doesn’t build confidence.

In my pitches, if I only get a 7-minute presentation, I do that. I practice beforehand. If they are genuinely interested, they will ask questions afterward, and then I will add personal insights and connect with the investors more. My pitch also improved dramatically, leading to successful funding.

4. Taking Too Long to Explain or Not Connecting Emotionally

If you don’t capture your audience’s attention quickly, you lose it. I learned this the hard way. Now, I ensure my startup’s purpose is apparent immediately. I’m not saying, to give them something long thing about some random thing or small talk, but get interested in the beginning, but not telling everything.

In my first pitches, I buried the lead. However, interest levels rose significantly when I started highlighting the problem and solution within the first few slides. And I found building an emotional connection is critical. Investors invest in people as much as in ideas. An origin story can be a powerful tool here.

I once revised my pitch to start with my personal journey and the ‘why’ behind my startup. It had so much more interest. This is how it went, after I introduced myself, I rubbed my hands together, broke into the BIGGEST smile, and said, “let's tell a story.” This emotional connection made a huge difference in the response I received. So now, in every pitch I do, I start with a small story to illustrate the problem before telling the potential investors and customers the solution.

Understanding these nuances made a massive difference in my approach to investors. It’s not just about the idea but how you present it and yourself. Keep refining your pitch, learn from each interaction, and stay persistent. The right investor is out there!

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All articles and writings posted on my personal accounts solely reflect my own opinions and perspectives. They do not represent the stance of www.globalify.xyz

Hello, I’m Eric Fung, tech enthusiast & co-founder of Globalify based in San Francisco & Hong Kong. My role involves building products, and I strongly believe in delivering value to you, the reader.

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