Funding Failures
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Funding Failures: Why Your Business Idea Isn’t Gaining Investor Attention

New companies and products are introduced to the market all the time. They successfully secure funding and have customers lining up to hand over their hard-earned money as if it’s the most effortless process. However, that’s not everyone’s experience with launching a new business. Some entrepreneurs can find it challenging to attract investors and have people take them seriously. Many factors can contribute to funding challenges, and your business might fail to pique investor curiosity for some of the reasons in this article below. 

Your Idea Doesn’t Solve A Genuine Problem

Products have to solve problems. Otherwise, they aren’t always going to be in as much demand as products that do. Investors might not always be eager to take the leap and invest in something that won’t fly off store shelves and give them a healthy return on their investment. Take MAXPRO Fitness as an example. Founder Nezar Akeel received $500,000 in funding for 3% equity and 5% advisory shares for five years for a product that provided an alternative to a gym. Time-poor and space-poor individuals can purchase a portable fitness product that provides full-body exercise. It solves a genuine problem of people not having time for the gym or space for traditional gym equipment in their homes. If your new business idea isn’t an excellent solution to a common problem potential customers face, there are no guarantees you’ll receive the funding you want.

You Have No Support

Investors don’t always want to work with individuals who have no experience or team behind them. This can be one of the many reasons why investors decline funding requests. If you’re a solopreneur still struggling with things like taxes, patents, and product development, your inexperience can sometimes be viewed as a risk. However, that doesn’t mean you’ll never get the funding you seek. Instead, being declined based on a lack of support can motivate you to build a team. Reach out to experienced individuals like advisors and accountants who can potentially put you in a much stronger position to secure investor funding in the future. 

You Don’t Have A Business Plan

Everyone around you can say that your business or new product is brilliant and will be in demand, which might be true. However, the numbers have to stack up within a robust business plan. If you approach an investor or multiple investors with nothing more than an idea, you’ll likely be declined before you’ve finished your sentence. A business plan is integral to any successful business because it’s essentially a road map to success. Fortunately, not having one now is simply an opportunity to create one. The U.S. Small Business Administration provides business plan templates on its website that you can fill in and present to would-be funders. At a minimum, your business plan should include: 

  • An executive summary: What your company is and why it will be successful
  • A company description: Details about your company, the problems it solves, and who it will serve
  • A market analysis: Your target market, the industry outlook, and the strengths of your competitors
  • Organization and management structure: Your business’s legal structure and details on each person’s role within the company
  • Products and services: What you offer your customers and details on patents and copyright
  • Marketing and sales: Your potential or current marketing strategy
  • Funding request: How much funding you need, what you’ll use it for, and your plan for paying it back
  • Financial projections: Details on how much your business is expected to earn or already does earn
  • Appendix: Supporting documents like permits, patents, and contracts 

It’s Too Early For Funding

Many years ago, business owners would secure funding streams by writing a great idea on a piece of paper. Those days are mostly over. Investors want evidence that your product or business will work. The only way to provide that evidence is often by having it already in production and real-world settings. For many entrepreneurs, that’s the whole reason for seeking investment: they need money to produce it and put it in real-world settings. It’s a vicious cycle. Sometimes, the best solution is to use your own hard-earned money to produce a few of the products you intend to sell on a much larger scale and test them out with genuine customers. Record the results, and you’ll have something tangible to show potential investors. 

You Want Too Much

The numbers have to stack up for investor attention. If you’re asking for a significant sum of money for very little return, investors might not be lining up at your door with their wallets open. Make the numbers make sense, and you might enjoy a far different outcome. If you’re struggling to know how much you’ll need and the kind of returns your investor will need to see, talk to an accountant. You might also approach people who have invested in businesses in the past to gain insight into the general expectations. Sometimes, you have to lower your sights to gain the traction you’re looking for.                                                                                Gaining investor attention is not as simple as having a bold and potentially lucrative idea. Your idea must have real merit with real-world evidence of its success. If you’re having difficulty securing funding, consider whether it’s for some of the reasons above. You might then be able to make changes that lead to investment success.

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