On a daily basis, we are approached by individuals wanting to raise capital for their business. From technology firms, health care firms, telecommunication firms, breweries, hoteliers, and being based in the Washington DC metropolitan region we get our fair share of political products. So what are the Top 10 reasons why you are failing to raise capital? Here is a list that we have developed that we see as critical to people not being able to raise the capital they need for their business.
Business owners always yearn to have a higher valuation for their company, however do not understand that by being unrealistic with their financials they loose all credibility with potential investors. Founders should undervalue their firm and seeking investors to fight to fund the project, rather than over-valuating the investment resulting in everyone walking away. We have experienced multiple Angels and VC’s fight for the right to invest in a variety of businesses and pay a premium for that privilege. Remember Angels and VC’s main job is to invest in businesses and help owners reap the benefits of exponential growth via capital injections.
The top 10 reasons why you are failing to raise capital are:
- Inability to Monetize business
- Lack of Business Strategy
- Improper Valuation
- Management/Team challenges
- Technology is unproven
- Lack of differentiation
- Undeveloped market
- Lack of an exit strategy
- Market is just not big enough
- Lack of Sales
As we analyze the Top 10 reasons why you are failing to raise capital, we come across a lot of founders who are amazing technologists but do not know how to monetize their business. Monetization is the ability to take your product/service and make it profitable. An exchange of an asset for another has to occur. It does not necessary have to be money but as an example, data could be the exchange. Most recent technology firms such as Groupon and Facebook have yet to develop a successful process to monetize their businesses. Monetizing your businesses is the only way you can reach sustainable growth and above average valuation.
The most challenging component for us is to face an owner/founder that lacks clarity within their business. Another of the Top 10 reasons why you are failing to raise capital is that most owners do not understand what their Competitive Advantage is and how retain and maximize the value proposition. Generally founders are often good technicians, managers or entrepreneurs, though rarely do you see all three. To be successful you generally need at least two of the above. Owners need to have a clear vision of where they are going and where they want to use the invested capital.
Raising capital is not just about presenting a concept or a plan, but rather communicating a systemized methodology to increase the value of an invested dollar and having the ability to implement the idea with limited resources. You have to communicate that you are a serious business person and are willing to take every precaution with an investors capital.
If you are seeking investors and your potential investors do not write you a check, give HafeziCapital a call and we will help review your pitch documents, executive summary and develop a realistic approach to have you raise capital.