It’s the same cry for help I get about once a month, and it’s every founder’s worst nightmare. You pour years into a business idea, then months into building the perfect pitch deck for a series of stressful investor meetings. Then, at the end of it, you’re left with a smattering of well-wishes, a few vague invites to send follow-up emails, and a whole big bucket of rejection.
You’re back at square one. No funding, no traction, no resources. This is not uncommon.
I don’t know you and I don’t know your idea. But I have played the startup game for over 20 years, both bootstrapped and VC-funded, and I can assure you of one inarguable fact:
Your business idea just isn’t investable as it stands. Now what are you going to do about it?
The worst thing you can do is keep charging ahead with your fundraising plan. That’s the definition of insanity — doing the same thing over and over again and expecting a different result. What’s worse is that some advisers and even some investors will tell you to do exactly that.
“Keep banging your head against the wall, kid! It’ll happen someday!”
Here’s what to do instead, based on my own experience hitting this same wall and later helping dozens of founders, both first-timers and repeat founders, break through it.
Option 1: Give Up
I remember the first time I had to shut down a startup because we failed to raise money. It was actually an attempt to save an already-doomed startup that had raised over $15 million in VC funding back in the early 2000s.
It was an online video product, which didn’t really exist in the mainstream at the time. According to three of us on the tech side, the only problem with the business was the target market. The tech worked, the user base was engaged, money was coming in, it was just coming in from the wrong crowd.
The three of us made one last pitch to the existing investors to use some of the intellectual property and $2 million more in new funding to pivot the model from B2B to B2C. Online video by the people, for the people.
The investors rejected our pitch. And since the three of us were young and technical and could easily find another job, we gave up.
YouTube launched four months later.
But wait. You’re not going to give up, right? No way. So let’s restart the numbering of your three options.
Option 1 (for real): Rewrite Your Pitch
The first thing we should have done — the first thing you should do — is change your positioning and messaging entirely.
An investor pitch is literally just a marketing campaign to sell investors a business idea that will create an outsized return on their spend. If you’re not hammering home the unique differentiators of your business model in a way that makes that return perfectly clear, you’re shooting yourself in the foot before you even get off of the starting line.
To dumb it down a bit, I like to think I write some really great and helpful content, but my editor will tell you I’m awful at coming up with titles that draw the reader into that content. My content could be the advice that changes your life, but if I never get you to read it, it isn’t worth anything to you.
Your pitch, including your pitch deck and even your projections, is the title on the content that is your business. It should get revised from pitch to pitch, based on what you learn each time you pitch it. If you’ve gone through dozens of pitches without making dozens of changes, it’s time for a big pitch pivot. If you don’t know where to begin, get help — not help with your business idea, but help with your presentation.
If that doesn’t work, maybe the presentation isn’t the problem.
Option 2: Reinvent Your Idea
It’s easier to put together a pitch deck than invent a disruptive product. We all know this. But one of the main reasons an investor will reject an idea is because that idea isn’t disruptive.
In other words, your startup idea isn’t crazy enough.
Throughout my long career as a multi-exit, multi-failure entrepreneur, I’ve gotten to know hundreds of venture capital, private equity, and angel investors. And not one of them is in the startup investment game to make a modest return on a reasonable business idea. They can get a much safer risk-reward ratio on the public markets or in money market accounts.
I will echo that. If I was going to build a company around a small and stable startup idea, I’d much rather get a regular job. At least I’d be spending someone else’s money and I’d probably get free snacks and sodas too.
For your idea to be investable, it needs to be able to show a lot of growth very quickly, especially in the early days, when the most risk generates the most reward.
I’m not saying every startup has to be a moonshot, but there’s a distinct sweet spot between making money and fueling growth. Rarely do both of those things happen at the same time, so you need a model and a plan that accommodates that bifurcation.
Option 3: Rethink Your Funding
It’s also a lot easier to ask for money from seemingly super rich investors than to ask for money from cash-strapped customers. But in the same way that not every startup needs to be a moonshot, not every business needs outside investment to be successful. In fact, most successful businesses don’t get outside investment at all.
Maybe your business idea isn’t investable right now because your business doesn’t need outside investment right now. If that’s the case, think about building a revenue base instead of a customer base. Think numbers, not people, and prove all those investors wrong.
Build a minimum viable product wrapped around your core idea and launch it to a real market of real customers.
Use no-code and low-code solutions to mimic all that expensive infrastructure and IP that will become your secret sauce.
Start with one paying customer, then a handful, then enough to build a decent run rate with low margins that will eventually increase with automation and repeatability.
Develop an investment plan around acceleration, so that the line to draw to get from risk to reward already has quantifiable evidence for its existence.
The fact is, most founders seek outside investment way too soon — well before they’re ready to execute, let alone put any funds to efficient use. If you build a business on revenue first, you can avoid the entire lack-of-investability problem in the first place.