7 Reasons Why Investors Won’t Back Entrepreneurs

Seeking investors is nothing like showing up and getting picked for your local community youth football league. The chances of the average person being “picked” at all are infinitesimally small, and there are many reasons for potential rejections – those without a thick skin need not apply. 

The most successful entrepreneurs are passionate about their idea, but they don’t let it consume them. There are many practical reasons why investors won’t touch them with a bargepole, even if the product itself is “brilliant.” Entrepreneurs have to be aware of these potential banana skins. Here is my take on the top 7 reasons why people don’t win investment for their business.

They aren’t a leader. There is so much written about leadership (too much, some may say), but there is no situation, which requires leadership skills more than when managing an ambitious start-up. If the entrepreneur cannot inspire their people to follow them on the journey, how can any investor have any certainty about the security of their investment?

Customers aren’t interested. If there is no proof of actual or potential success, the growth story slides more into fantasy land. If there is no current market, very few products will be strong enough to create one by themselves. If entrepreneurs don’t understand their customer base from day one, they are simply relying on luck in aiming to “meet” them somewhere along the way.

Their team is second–rate. The entrepreneur themselves might be a super star, but unless their team are equally impressive, investors will get cold feet. Very few companies rely on the efforts of one person for their success – and unless the team has the talent to pull off the magic, progress will stall pretty quickly.

They don’t listen. Investors are buying into a business, and they need to be able to give the entrepreneur feedback and constructive criticism when required. If the business owner is not coachable, investors can feel like their money is disappearing into a bottomless pit with no hope of recovery. Listening to feedback and acting on it is the hallmark of the best start-ups.

They don’t know their stuff. If the investors know more about the product and its market than the founder, then the relationship is doomed to failure from the start. Investors will add all sorts of value, but the product expert should be the entrepreneur themselves. Being unaware of the broader market is the first sign of tunnel vision.

They’re all action, no thought. Entrepreneurs are often seen as 100mph make-it-up-as-you-go-along adrenaline junkie types who thrive on change. However, the best entrepreneurs can weigh up the consequences of their actions, and test things out at 50mph before they get up to speed.

Lack of a long-term vision. If the product or service doesn’t offer the potential for scalable growth, most investors will pass. An entrepreneur’s vision should be grounded in reality, and ideally involve growing revenue without growing overheads in the same proportions. Basic business sense 101. If investors have no sense of when they will see an ROI, they will run for the hills.

Please share your thoughts in the comments section below as I learn just as much from you. I write a daily blog on leadership, innovation, careers, tech & self improvement. Here are some other articles I have written. If you like what you read, please feel free to follow me here on LinkedIn or via twitter @anuragharsh.