The global tech-startup community is thriving. Entrepreneurs all over the planetoid are trying their best to create businesses, which achieve the unicorn status. However, for most companies and foundations, becoming a unicorn is just a fantasy. Only one out of every five million non-funded startups climb that ladder, and one in ten thousand funded startups reach to that point, which means that only 1% of startups get funded.
Why is it so Difficult to Pitch Your Startup to a Venture Capitalist Firm?
Venture capitalists (VCs) see thousands of passionate entrepreneurs who try to pitch their chimerical ideas through elegant and engaging presentations. Most entrepreneurs invest a great deal of their time and effort into creating their presentations.
However, countless (VC) pitches fail, and this happens since investors take a considerable risk when they fund a startup. VCs encounter high rates of failure due to the ambiguity that is associated with new start-ups.
Due to that reason, most investors carefully analyses all the red flags when an entrepreneur pitches to them. They are not only investing in an idea they are investing in to the mind behind the concept. Therefore, they analyses the personality traits of an entrepreneur to see if that individual or team is worth investing in. The most common personality traits, which are associated with entrepreneurial failure, are listed as following:
1. Arrogance:
An attitude that is not customer-centric is highly discouraged. If an entrepreneur or a techie is enamored of their invention or product, there is a high chance that the person has low tolerance towards negative feedback or constructive customer input.
2. Indecisiveness:
If an entrepreneur is indecisive, it means that the individual lacks the required skills and capability needed for making a decision. For individuals who lack leadership qualities, it is challenging to take risks and to keep the team together. Therefore, they lack the skill to take on a big project.
Apart from that, the big five personality traits, which may also be known to some as the five-factor model. It is a taxonomy of personality traits which are evaluated and which play a role in entrepreneurial success or failure.
The Five Main Elements of FFM are:
1. Openness to Experience:
If an entrepreneur is cautious and reluctant when it comes to taking risks, there is a high chance of venture failure or stagnant output after some growth.
2. Conscientiousness:
Discipline is a trait that brings you success if a person is easy-going and careless; it will be difficult for them to organize and take things in a systematic order.
3. Extraversion:
If a person is outgoing and energetic, there is a high chance that communicating deals with customers and potential investors will not be a problem for them.
4. Agreeableness:
When an individual is managing a team of highly competent individuals, it is necessary for them to exhibit a friendly attitude and flexibility towards their subordinates.
5. Neuroticism:
Lastly, if a person is nervous while giving the presentation, the investor will notice. Lack of confidence in self is one of the biggest reasons for entrepreneurial failure.
The acronym OCEAN represents the five factors of the FFM. These are the personality traits that an investor is most likely to analyses when you present to them your business model. Investing time into creating a detailed, descriptive and elaborated version of a business model canvas is necessary for risk mitigation.
As a professional founder and entrepreneur, you should make a Wikipedia page for your business right after you make your business website for keeping a stronghold over your online marketing scheme. Furthermore, you should know how to mitigate the risks that surround your business else your startup will fall prey to the most common reason due to which startups fail.
Out of all the reasons due to which startups fail, the most common and apparent reasons are mentioned as following, after reading through the mentioned details you will be able to navigate your way out of uncertain situations. If you do not want to take a shot in the dark when going to an investor read through the following risks which you should mitigate in your business model.
1. Lack of Traction:
The reason why most business startups fail is that the lack of market need prevents them from gaining the amount of friction that they need to survive.
2. Lack of Initial Investment:
An insufficient fund is the biggest reason due to which operational tasks face execution delays and that in turn causes an increase in float time.
3. Working with the Wrong Team:
Working with a group of talented, motivated, diversely, skilled individuals is essential. If a team is incompetent and inadequate or if all members of the team do not agree upon a common-vision or long-term goals, there is a chance that the team will face fragmentation.
4. Excessive Competition:
If your competitors are a high-end brand, or if you are designing a product that is already created by a big corporation, then they will break your market share. However, if you give your customer something new to the public, then you will have the first-mover advantage.
5. The Price of Your Product:
Most new startups struggle with the pricing issue. The main struggle is to price high enough to maintain a standard and to cover the operational cost. The price must. However, be low enough to intrigue the customers.
6. The Quality of Your Product:
A product that does not appeal to the customer will most likely fail. Therefore meeting all the required manufacturing needs along with product quality maintenance and packaging requirements is essential.
7. A Flawed Business Model:
A business model that is not updated, or a business model that focuses on a particular channel of the canvas, is most likely to fail, a business model helps in better analyzing the tasks and risks associated with the project.
8. A Poor Marketing Strategy:
If you do not invest time into marketing for your business using the right platform, then all of your efforts will go in vain. Using a multi-channel marketing strategy is necessary. However, it works best after carefully analyzing your targeted demographics.
9. Not-customer Eccentric:
Considering the fact that the product that you are designing is for your customers and not for you. You should put in efforts, reach out to your customer, and collect constructive feedback that will allow you to modify your product and services according to your customer's requirement.
10. Timing:
Give your customer something when they need it, desperate need in the market sets the ground for product development. Your product should come out during the height of the public recession.
Conclusion:
By following the guide that has been presented for your assistance, you will be able to pitch your business idea to your investor in the most effective manner, not only that your dream of making your business a unicorn startup will not be far if all of the mentioned risks are avoided.
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