Startup ventures are risky as securing investment is many times the most difficult task entrepreneurs need to accomplish. There are many startup businesses vying for funding with whom you have you have to compete, making it even more difficult hurdle to overcome. Investors cannot fund every startup and the decision is largely based on how profitable a startup idea sounds.
Mistakes that Hold Entrepreneurs from Getting Investment
Many entrepreneurs do some basic mistakes and you need to be aware of them to have a better chance of securing investment for your startup. Let us look at them now.
Unrealistic Valuation:
Newbie entrepreneurs often start the discussion providing a very unrealistic valuation of their startup. For an investor it translates into lack of maturity and knowledge of their financial position. This creates doubts in the mind of an investor about whether the entrepreneur will be able to take the startup to a position where it starts to earn profits. The investor is basically searching for a startup which has a clear business model that they will support and assist to grow further.
Utilizing the Managerial Team:
A business is never a one-man show and if you want to succeed then you need to have a good team to support you. From an investor’s point of view, he wants to feel confident that you have the right team that is capable of taking the startup to new heights and there will be good returns on the investment made. You need to prove to investor that the team is ready to face all the hurdles and succeed in its endeavors.
Understanding the Marketplace:
If you are just starting up and have no idea how your startup plan will fit into the present marketplace then you are out of luck. Investors want to see a clear strategy from your end about reaching the target audience. You need to evaluate whether it is a small or over crowded market and is it possible to target a different market to have better chances of success.
Funding for Young Entrepreneurs
Securing investment is even more difficult for young entrepreneurs who are in their 20s and most of them are starting their first ventures with very limited experience in this field. For these young entrepreneurs getting bank loans is difficult since you need to have good credit rating. If there are late payments from college showing up on your credit report then it will have negative effect on approval of your loan application.
Credit Card Debt:
These entrepreneurs are left with no option but to use credit card debt and as everyone will agree, it will be risky to use credit card debt if earnings you make are still not regular. However, if you must then do not spend more than $5000 every month since then you fall into separate risk category of most of the credit card providers.
Friend’s Circle:
Other financing option is friends and relatives but many young entrepreneurs say that there are very low chances of getting any funding from these sources since they are least interested in their business proposals. However, you will have to work smartly here and expand your financing circle. One good example is of Atlantic Records where its founder was able to get a loan from their old family dentist.
Angel Investors:
Angel investors will hardly be interested in investing large funds in such startups but you may be able to get around $25,000 from them if you have a good business plan and concept.
Summary:
You need to work hard to get funding for the startup. If you take note of the errors entrepreneurs commonly make, then you will be able to increase your chances of approval.
