Reason #1 – Entrepreneurs Fail to Prepare and Plan Their Attack
Most entrepreneurs fail to raise capital because they don’t strategically plan their attack. They bring knives to gun fights and then wonder why they die in the process. Entrepreneurs’ passion, while wonderful in its purest form, makes them impetuous and impatient. They often skip the preparation phase completely and move right on to trying to find investors. If they are lucky enough to get anyone to listen to them, they are quickly and rudely shot down (most likely because they are fumbling around describing their idea; they don’t speak the investors’ language; and their corporate information is either poorly done or non-existent). By this point, the formerly passionate, budding entrepreneurs have most likely depleted their savings accounts, and their spouse, family and friends have started calling them a complete nutcase. It is no longer possible to get out of bed to face another day of rejection, so he or she stops prospecting for new investors and starts looking for a job. Not a very nice story, huh? Unfortunately, it is a true story that happens all the time.
Reason #2 – There Are More Entrepreneurs Than Lenders/Investors
It’s a fact of life that there are more entrepreneurs looking for capital than there are investors writing checks. If you don’t stand out and do it right, you’re dead. Your company must be unique, you must be better prepared and you must prove (as much as possible) that the market will buy your product or service by bringing in revenue. Then you must convince the investors by presenting a fabulous story, which gets their mind racing about the possibility of making serious money and opens their purse strings!
Reason #3 – Entrepreneurs Lack Strong Problem Solving Skills and Give Up Too Soon
This may be the most lethal obstacle of all: most entrepreneurs simply lack problem-solving skills (essentially survival skills) and they give up too soon! Remember, this is war and there are bullets and bombs going off everywhere and every day. Some days are worse than others, but there will always be problems—you can count on that! This path you have chosen is brutal. Therefore, if you’re going to win this capital-raising war, you have to learn some serious survival skills. You must learn how to stop the panic and overcome the problem by out-thinking your adversities. You must develop a system for coping with these issues that becomes a natural reflex.
Reason #4 – The Total Package Isn’t Sexy Enough and Your Story Stinks
The last reason entrepreneurs fail to raise capital is that their total package lacks the hooks or sexiness that gets investors excited. In other words, you didn’t sell them on your product or service, or maybe your management team is weak or your numbers don’t have enough profit margin! Something didn’t make the cut. Each investor is different, but in general there are certain criteria that each one seeks. Therefore, if you know what the investor wants, you must make sure you assemble a sexy package of your product or service that gets noticed! In addition, you have to be able to tell a story that gets investors sucked in and their adrenaline going. This narrative has to make sense and it must be sold with passion and conviction. You have to make investors see themselves as part of your entire story through to the end—the exit strategy. When you can do that, you’ll stand a great chance of raising your start-up capital.