why investors say no?

By July 26, 2019 No Comments

The pitch is the gate between an entrepreneur and the money, as we all know money is trivial factor for companies’ success. So entrepreneurs pitch ideas and businesses to investors and most of the time the investor says “NO”, in fact out of 100 pitch heard by investors only 2 of them will get a “YES”.

But why investors says “NO” in the first place.

  1. No homework about the investor, the lazy factor

Investors give money, but investors have their strategies, some will invest only in tech, others will invest in renewable energy.

 Some investors invest in seed phase others in growth phase.

Unfortunately entrepreneurs enter in a hunger phase where they pitch every investor in the list without knowing if they are fit to their investment strategy.

  • Presenting just an idea, no dirty hands included

Many of the entrepreneurs refuse to start working on their ideas unless they get the first investment.

Presenting just a PowerPoint without at least a POC(prove of concept), is a red flag for most investors.

Investors want to see that the entrepreneur made a real effort to create his first product, feel his creativity gathering small resources.

At the end of the day ideas are cheap execution is priceless.

Investors will probably say no to an idea.

  • Founders are not the champions

Investors invest in people not in products, this statement maybe shocking but it is true. The human factor is extremely important. There are a lot of red flags about the founders including:

  • Founders not inspiring trust (being over confident, absence of competition, not being transparent enough, laying about numbers, making the business look too good to be true,…)
  • Have no experience to do business or have no insight about the business,
  • Have no character or sales skills, bad management of the social media image, hard to work with (being hard to coach or being too stubborn).
  • The market makes all the difference

Numbers are important to present a market attractiveness, giving no appealing numbers about the market will get the entrepreneur a “NO”.

What will get a “NO”?

  • The market is not big enough,
  • The market is big but there is too much competition.
  • Having no idea about the target, having no idea about how to penetrate the market.
  • The pitch

Let us say a founder did everything right, has an MVP, has strong experience and very open, his business has a great market. He comes to the investors he pitch but none of the above was clear, the idea was not clear and the investors left with a question “What he wants to build?” or “Ah the business looks like that existing business” that follow with a big “NO”.

This is a very common scenario where the founders fail to deliver a clear pitch, a clear picth has to be:

  • Coherent and honest, tell a clear story(I said a story)
  •  Brief, no long texts and one message by slide
  • Clean and attractive, the esthetic is very important
  • Human, the pitch shouldn’t be just numbers and facts, the human factor is very important where the founder tell the story of how he got the idea, what challenges he got until now ect. The human side get the founder empathy and inspire trust.
  • Complete, the pitch should be built in a way that honor the founder and the business, therefore it should contains all the information and the elements to serve this purpose.

If a pitch fails to deliver all of the above a “NO” will be the answer. An upcoming detailed article is coming about the pitch.

  • Investors make mistakes, they are no superman

Investors are just humans and they make mistakes, they may say “NO” to a great idea where they can’t see the potential or where they see too much risks even if the entrepreneur made everything right.

If you believe that you have an excellent business idea, make a big effort approaching the investors, don’t just go with a pitch, do your homework and make a great pitch and if you get couple of “NO” don’t feel angry and scared and hide. Be persistent until you get the “YES”.