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Why Investors Hate Your Startup and How to Change Their Minds

Posted by Ryan Mason to Investment, Accounting, Funding

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These days, venture capital is flowing like Niagra Falls: would you believe that over $98 billion in funds were raised by startups in 2015. However, just because money is being invested doesn’t mean it’s easy to get. If you’re an entrepreneur running an early stage business, you may be taken aback by an investor that’s less than thrilled about your company. In fact, they might flat-out drop you like a hot potato.

If that sounds like something you’re going through now, instead of throwing in the towel or throwing punches, here’s how we recommend you deal.

Accepting Rejection is Part of the Entrepreneurial Life

Rejection is part of being an entrepreneur, as is failure. Although you likely know this, it’s still a huge shock to the system (and the ego) when you experience rejection. Of course, the key to success in any endeavor is persistence, so if you fall, don’t stay down long. Use the sting from the experience as fuel to approach investor after investor until you get what you need.

Remember: Even Pandora was rejected more than 300 times before they finally found funding! (Hopefully, you don’t have to go through that).

Realize That Hey, Maybe These Guys Have a Point

It’s hard to accept criticism no matter who you are. Let’s say a potential investor had some pointed criticism regarding your company’s organizational structure. You can do two things: dwell on their “negativity” and move on, or view their feedback objectively and use it to improve.

Before getting defensive, open your mind and try to see this radical candor as an opportunity for free business advice. Take it or leave it.

This feedback may be especially hard if it’s about the originality of your business, which is a major sticking point for many investors. It’s true that some of the greatest ideas in history weren’t immediately recognized as genius when they were invented, but on the other hand, sometimes things haven’t existed yet for a reason.

...But There Are Ways to Win Investors Over

If an investor is skeptical about your company’s long-term profitability (or anything else), here are a few ways to spin them over to your side.

Be Well-Prepared and Stick to the Facts

Having accurate financial statements not only paints an accurate picture of your company’s finances but subtly informs the potential investor that you’re a serious businessperson. In addition, investors want to see that your company is attempting to solve a problem, which can be extremely challenging sometimes.

Also, keep in mind that investors are more interested in the medium-to-long term than what’s happening right this minute. This means that you better be able to convince them that your company has serious and demonstrable long-term viability.

Chances are You’re Better Off Going with GAAP Accounting

GAAP accounting is a must if you’re looking to get your series A funding. The reasons why it is important are numerous, but for the purposes of this article we’ll focus on the fact that your investor is going to want to see that you have it before they take you seriously! Not only is GAAP accounting more accurate than cash-based accounting, it is more consistent since GAAP is based on accepted standards that are put in place by the government and used by all accounting professionals.

Want to know more about the importance of having GAAP for wowing potential investors? Check out this blog article!

Put Your Sales Hat On

Put yourself in the shoes of your customers and determine the exact, real-world value of your service. Then, pitch it to your potential investor in a way that leaves no confusion about the importance of your product or service: make them feel like the world would stop spinning without you!

Research Your Potential Investor

Every investor is different, and approaching an investor when you’re unaware of their investment history and personality isn’t a wise idea. This information is fairly easy to figure out if you know where to look; check their LinkedIn, personal blog, or with others in your network to find out if you think they’d be a good fit for your business.


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About the author
“Ryan

Ryan Mason

Ryan Mason is a content creator, former teacher, and martial arts movie collector from Concord, California. He currently lives in Portland, Oregon and loves coming to work at inDinero every day.

Success starts when you take charge of your finances.

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