Why Startups Fail to Secure Early Stage Funding for Startups

As an entrepreneur, navigating the seed stages of your startup can be likened to an extreme sport of some sort based on how extremely risky and tricky it is. In the early stages of your company, you need funds and securing said seed stage venture funds is not a walk in the park. 

There are lots of startups everyday all competing for attention and interest from seed stage venture capital firms. 

About 97% of all startups fail and that is a frightening number to say the least. If you are among the 97%, here is why that is the case:

Why Startups Fail to Secure Funds

Pitching to the Wrong Investors

Pitching to the wrong investors is a classic waste of time. It is like selling sunscreen in winter. Most VC firms prefer to invest in startups that are sector-specific. Granted, some firms also invest in promising ventures outside their area of focus. 

As an entrepreneur, first conduct some research on the VC firms in your area of focus to save yourself the hassle, pointless hassle I might add, of pitching to the wrong investors. 

Doing so will also help you save time and money in scouting for investors. Hey, you even increase your chances of securing seed stage venture funds because the investors you settle on are actually interested in the sector you are in.

seed stage venture funds

Bad Pitching Process

Even with the best, most-promising product, it’s nigh on impossible to capture VC firms’ interests if you don’t pitch your ideas right. Like I said, VC firms listen to copious amounts of pitches on a regular basis so your pitch has to stand out to even stand a chance. 

A study conducted showed that investors spend a little over 3 minutes on average reviewing a pitch. That 180 seconds can make or break your entrepreneurial career so better make it worth it for the VC firms.

It is understandable that you will be a little reserved in disclosing some relevant information about your idea – it is your intellectual property after all. 

Just by going through your pitch, it should have a strong value proposition as well as give sufficient ideas on how you intend to utilize the early stage funding for startups you are trying to secure. 

In the latter, have a detailed guide of how you intend to make returns on the VC firm’s investment funds. I can tell you for free that no VC will commit to investing in a startup that doesn’t have a clear plan on how to spend the aforementioned investment.

Having the Wrong Team

Investors indeed do have some reservations about who you have on your team. For instance, your whole team could be made up of rookies with no prior experience of running a company whatsoever. 

Investors in this case may be a little reluctant to dip their toes in the water because they see no experience in your team and chances of failure are higher compared to a team of seasoned veterans who know all the ropes.

With that in mind, it doesn’t hurt to have a strong team of advisors, an experienced board, or someone with some influence in your team before approaching seed stage venture capital firms for pitching. 

Even better, you could have someone who the investors know and trust or have interacted with in the past on your team. Investors are inclined to invest in who they know and trust. In brief, make sure you have a strong team. Strong in the lines of character, experience, and influence.