Why am I Being Rejected for Funding Because I am a Startup?

Why am I Being Rejected for Funding Because I am a Startup?

February 28, 2020 by investor

Luis asks: Why am I being rejected for funding because I am a startup?

Investors always ask that I have at least one year in business or more and that my company has revenue.

Usually, when you start a business you start from scratch. That is when you need the support to launch and develop new technologies.

In my case, there were three reasons that they closed the door on me. I have no revenue. The technology that I developed is superior to the current ones and big corporations do not want to accept the challenge of the new generation of science and technology.

If my company is generating revenue then I do not need any support to launch my products and services. Don’t you agree?

Well, Luis, it sounds like you have a new invention but cannot find funding for starting up a business around it. The investor wants to see proof.

You must demonstrate product validation and market validation. The product works and someone will pay for it.

So my recommendation is to find a paying customer who needs your innovation and build a custom version of your proposed product.

It won’t be the final product you envision. You have to start small and grow the product over time.

In this way, customers are funding your product development.

This is an ideal way to fund your business as you learn about the needs of the customer as well as build a standard product for sale to others.

Keep in mind, many customers are not going to get excited about 10% incremental improvement on cost and effectiveness over the competition. It takes a 10X improvement in reduced cost and improved functionality for them to switch.

Make sure your product plan includes a path to a 10X improvement.

Once you have revenue you may still need funding to grow the business. But at that point, you will have more choices.

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let’s go startup something today!

 


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NOTE: Investor Connect is a program under the Texas Open Angel Network which is a 501(c3) non-profit dedicated to the education around startup funding. Hall Martin is the principal contact, and may be reached at http://www.investorconnect.org/contact.
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Disclaimer:
Hall T. Martin is the Director of Investor Connect which is 501c3 non-profit dedicated to the education of investors for early stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions.

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