4 Reasons Why You Can’t Find Funding
If you’re reading this you probably have an awesome startup, an amazing team, a solid pitch deck, and a lot of passion about what you are building. But for whatever reason, no matter how hard you try you just can’t get any funding for your startup.
Does this frustrate you?
Well it did for me and the hundreds of other underrepresented founders we’ve mentored at Score 3 Ventures before connecting with our firm.
In this article I’m going to outline The 4 Reasons Why You (probably) Can’t Find Funding.
1. No Introductions
One of the most important aspects of capital raising creating a targeted list of investors and then getting warm introductions to them.
Many founders are unaware of the significance of this step and simply reach out to hundreds of investors cold with no understanding of why investors are not responding or continue passing on their startup.
Investors are extremely efficient (some say they’re lazy) and often have hundreds or even thousands of founders pitching their company to them each year. Because it is not likely for someone you know to introduce you to someone that they did not believe in to some extent, the concept of an introduction provides investors with an initial level of protection and vetting. Introductions greatly reduces the likelihood of the founder being a scammer, incompetent, unethical, or just a really bad person (among many other things) because a friend/associate of yours will not put their reputation on the line to introduce a founder that may fit this criteria.
At the end of the day, investors are looking for returns and feel pressured to protect their investments at all costs. Introductions historically have played a meaningful role in venture capital although many times have adverse effects such as diversity exclusion and herd mentality biases.
If you are looking to raise funding, you NEED introductions. Otherwise, you are just hoping to get lucky.
2. Your Deck
Now understand that there are many elements that determine the effectiveness of a pitch deck. This alone deserves an article for itself, but for the sake of this article I will break it down to the 2 core elements that I believe have the biggest impact (whether investors know it or not).
Design:
Contrary to popular belief, first impressions DO count. Investors may never give this feedback to you, (mainly because they don’t know or want to admit it themselves) but the design of your deck actually does matter. When an investor sees a deck that is not appealing to the eye, there is a natural bias that sets in while they are reading your deck. Before they even dive into the content of your deck, the likelihood that they will be excited about your company while reading your deck has already been greatly reduced due to the marketing theory of priming.
If you do not have a designer on your team and care about successfully raising for your company, you should invest in having a professional deck designed. Don’t go crazy on the spending, but an investment in your deck’s design can yield you a great return if it helps you land funding to get your company off the ground.
Your deck is an extension of your company. If you can’t design a good deck, it may give off the impression that you will not design a great product.
Content:
A pretty deck alone is not enough to woo investors. The excitement they get from seeing that your deck appears professionally done quickly fades away once they realize that the content within the deck is worthless.
Again this deserves it’s own article itself, but for starters, understand the basic things investors are looking for: A Meaningful Problem, An Interesting Solution, A Team They Can Believe Are Equipped To Build And Sell The Solution, Traction and/or Validation, and Your Ask.
If you have these elements and are able to deliver it in a compelling way, you will have a much better chance at getting the attention of investors.
If you need assistance in telling your story in a compelling way, I highly recommend reaching out to my good friend Donna Griffit for help.
3. The Follow Up
The pitch deck isn’t to get you the investment. It’s to give you an opportunity to build a relationship. After you successfully “woo” an investor with the pitch deck, your next goal is to get a meeting. This meeting can be in-person, over the phone/zoom, even in some cases more conversation through text and email.
I firmly believe that relationships are the single most important thing in the world. From this point on it’s all about building relationships with that investor and using them to get introduced to more investors to again… Build more relationships. You continue this cycle over and over again, and if done correctly, you should have no problem filling out your round.
Just make sure that you are building relationships with investors that there is proper Founder/Investor fit. Read their investor thesis, look into what companies they have already invested in, and get a feel of their network and the relationships may be able to assist you in fostering. If there is proper alignment and you feel like there is a good fit, lean into it and work on building a meaningful relationship with them.
4. Pay It Forward
After you have successfully built relationships with investors and raised your round of funding it is imperative that you PAY IT FORWARD. Help other founders that you know that are struggling to get introductions. Send them this article and mentor them on their journey to raise funding for their company. Not only will you be doing a good deed for others, but you will greatly benefit as well! Reciprocity is real. If you help a founder achieve this goal they will never forget this gesture and as they become more successful, you have another powerful player in your friend circle to lean on. This is how empires are built. Start building yours.
Conclusion
Raising venture capital is by no means an easy task. I personally do not recommend it for many businesses and much rather you create a business model that allows you to bootstrap your way into significant growth before even considering raising money from VCs.
If you believe that based on the nature of your business Venture Capital is the best route for you, then use the tips in this article to increase the likelihood of a successful raise. On a high level, it all comes down to these 4 points:
- Getting Introductions
- Having a Solid Pitch Deck
- Follow Up and Building Relationships
- Paying It Forward
If you have any questions in regards to raising funding for your startup, feel free to reach me on Linkedin or by emailing me at df@score3.org.
— —
Score 3 Ventures is a firm that sits in the middle of the start-up/venture ecosystem. We connect underrepresented founders with funders seeking to invest in women and minority founders.
We also offer opportunities for individuals seeking to break into the VC world as a career path.
Interested founders seeking capital and individuals seeking to work in VC can apply on our website at Score3.vc.
Darrel Frater is the Founder and CEO of TheClub and is a Venture Fellow at Score 3 Ventures.
