Startling Reasons Why Your Are Not Funded Yet

For those who don't know, VC, PE, and almost every type of fund make money from the 2 and 20. That is 2% of assets invested and 20% of the increase.

What matters to most fund managers is how fast you can raise your company's value. Sales, products, and other essential things are a much smaller percentage of what your investors care about.

The investors want you to raise the next round at a much higher valuation. This will give them a higher return on paper, which they can use to raise future funds.

Deal flow

Why it seems so tricky to land funding goes back to what the industry calls deal flow. Most of an investor's time is spent searching for great deals—not just good deals or low-risk deals but deals that can impress their investors or boss. Therefore, only some of the people they talk to will get funded.

Decks

A few years back, most VC deals required a business plan. We had one for my first company. However, like today's deck, this is just a snapshot that investors use to swipe right or left. It is the deciding factor for the first meeting. That is it. No one will spend much time with it, yet it must be attractive.

What matters

Once you get a referral, you send your deck. After that, a few investors will request a meeting. This is not an interview. They do not care about your family or the dog barking for a walk. Instead, they are looking for reasons to say "no." If you want to make it to the next step, be sharp, be prepared, and have the answers ready.

The picture

A few moments on a deck and 15 minutes for a pitch are all you have to prove that your company is a great deal. At times, an additional moment or two is on your website. However, looking at your website or sales collateral usually convinces them that they should pass.

How to win

What matters to the investor and what matters to you are usually different. An investor is looking for a deal, and you are looking for a life. To get the funding you need, you must present a picture of an excellent deal. You have to paint a once-in-a-lifetime opportunity without using those words. You do this with your financials, market understanding, dress, and preparation level.

So what

As a young founder, I had the misguided belief that my interests and those of the investors were aligned. They are not. Instead, they want you to grow fast regardless of whether that is in your best interest. For this reason, accepting funds could mean the downfall of your company.

Exits

Every company has a lifespan. For startups, the sooner they go from zero to exit, the better. Perhaps not the end, but a massive change that gets all shareholders paid. Start with the end in mind and have a clear plan for the exit. Remember, you are painting the picture of a great deal, not a great company.