After 15 years of wanting via enterprise pitches on the AIN platform, you get very fast at analysing funding alternatives and recognizing the worst startup concepts. The commonest theme is that the entrepreneur clearly hasn’t given their enterprise sufficient thought to refine it for launch and positively not sufficient to encourage an investor.
With this in thoughts, I’m going to listing 5 explanation why an investor may say no, and provides actual examples of a few of the worst startup concepts that we’ve acquired through the years. It gained’t shock you to study none of them became viable companies.
>See additionally: Q&A – Sarah Turner, Angel Academe: ‘Ladies have a tendency to speak extra actually about their enterprise’
5 of the worst startup concepts…
#1 – Attempting to unravel an issue that doesn’t exist
One entrepreneur thought it could be a good suggestion to design footwear with TV screens in them. The remainder of us realise there merely isn’t any need for individuals to stroll round watching TV of their footwear. It’s fairly simple to see why this one by no means made its manner onto the store cabinets.
#2 – The enterprise is immoral or unethical
Traders are likely to favor to spend money on one thing that they really feel enthusiastic about and can assist enhance individuals’s lives. For apparent causes, traders will likely be immediately turned off in the event that they really feel the enterprise is unethical. One such instance was a “rabbit mashing” manufacturing facility, which got here from a Russian entrepreneur. Perhaps one thing acquired misplaced in translation, however why would anybody need to mash rabbits? This can be a worthwhile endeavour, however it’s not one thing that’s going to enchantment to traders. We additionally all the time wrestle to generate curiosity for betting/playing firms, as that business has such a foul fame. In reality, the rise in demand for extra moral and sustainable companies is the explanation we launched our spin-off web site SeedTribe, which is a group for companies with social impression at their core.
#three – The product is just too area of interest
Typically you see enterprise concepts that will have benefit however the market dimension could be too small for the enterprise to ever be viable. My high choose right here was a store that offered particular person footwear for individuals with one leg. Though this might be a really helpful service for some individuals, the variety of goal shoppers could be too small to generate sufficient revenues to maintain the enterprise.
#four – Being overambitious and unrealistic
At AIN we actually love maverick geniuses, however entrepreneurs all the time run the chance of being overly formidable. The winner on this class was a “crashless aeroplane” to eradicate airplane accidents. You do get sensible minds who provide you with new innovations, however it’s important to be slightly sceptical about individuals declare to have solved an issue which enormous industries have failed to unravel themselves. You clearly get breakthroughs sometimes, so do need to preserve an open thoughts, however on this case, the enterprise alternative actually fell away after we began to dig slightly deeper and sadly it turned out to be an, ahem, flight of fancy.
#5 – Attempting to suit a enterprise right into a catchy title
Typically entrepreneurs provide you with a catchy or humorous title after which attempt to shoehorn a enterprise thought round this. One such instance was a bar referred to as Out with a membership subsequent door referred to as Out Out. Though the idea was fairly entertaining, that’s all it was. The entrepreneur had no prior expertise within the hospitality sector and had completed nothing else to develop the idea. It takes two minutes to provide you with a catchy title or enterprise thought, however the important thing part is what follows –creating and executing the entire enterprise technique.
>See additionally: Why small companies ought to name upon the professional angels
… and seven methods to verify your enterprise will get angel funding
On the flip aspect after 15 years you study there are specific ideas which can be common to making sure startups do get funding.
A good suggestion with a transparent USP
How is the enterprise completely different to what else is available in the market? What drawback does it clear up and is that this a market that’s displaying nice potential for future development?
Progress and traction to this point
Angel traders will need to have a look at the progress and traction that the enterprise has achieved to date. The investor needs to see that the entrepreneur has managed to bootstrap the enterprise so far as doable, spent earlier funding properly and proved that they’ve what it takes to develop the enterprise.
Earlier expertise and experience
Traders will need to know concerning the founders to make sure they’ve the related abilities and high quality to take the enterprise to the subsequent degree. They may also have an interest within the firm’s earlier traders to know the calibre of the individuals who have chosen to again it.
High quality of paperwork introduced
Time-pressed traders must shortly determine what makes the enterprise completely different. With doubtlessly a whole bunch of companies on their radar you want to have the ability to have well-presented paperwork that shortly get to the nub of what makes the enterprise stand out.
Most crucially there must be an affordable valuation that can allow the investor to make an honest ROI after they exit. Traders are clearly seeking to become involved as a result of they need to make a return on their funding, so the potential ROI must be excessive sufficient to entice them in.
These needs to be affordable and the entrepreneurs ought to be capable of clearly clarify the assumptions they made to calculate them.
Well timed response
That is crucial. First impressions actually do rely and traders will usually choose entrepreneurs on how shortly they reply to emails, reply their questions and supply the knowledge or paperwork they require. It is among the few methods the investor can choose first-hand how environment friendly the entrepreneur is. It’s additionally essential to remain responsive all through the entire negotiation course of to maintain the momentum going and get the traders over the road.
Get these components proper and you may keep away from the pitfalls, which is the easiest way to get your startup the funding it wants.
Mike Lebus is co-founder of the Angel Funding Community
Additional studying on angel funding
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