Startups That Will Never Get Funded

Every week, at nihub we receive at least 200 investor decks and pitches from companies looking for funding.

Yes. It is true that in China it is easier to get funded in comparison to most Western markets, especially for Early Stage Startups. 

We have helped many startups to raise funding successfully and move forward without a hitch, but unfortunately for some it is not a problem of funding but an integral fault in the company  itself. 

 In order to best prepare our startups and entrepreneurs for the tough startup world here in the Middle Kingdom, we’ve compiled this list. 

Here is a list of types of startups

that’ll will never raise strategic

funding and why:

 

(1) Startups Without A Pitch Deck

You may be wondering, how could they possibly be looking for funding without providing a deck, pitch, or some form of introduction of their company? 

We are wondering the same. 

 Far too often we have seemingly great people with great ideas coming to us in search of funding, but unfortunately not enough focus to solidify those plans in a coherent manner. 

As investors we have no choice but to say “No, thanks.”

(2) Market Size

We have seen some rocket-science projects which can take the majority of the market. Problem is only that the market is too small. VCs & Angel

Investors will never invest even in the best of projects which cannot go to  an M&A or an IPO. 

To do either of these, you still need a large enough market to facilitate your growth and ultimately your spending.

Of course, not every project that raises funds will automatically reach this success, but you can bet that if there’s no chance of an M&A or IPO then there’s little to no chance of raising funds to begin with. 

As the say, on to the next one…

(3) No Competitive Advantage

This is perhaps the one we have to explain the most. As a VC, innovation center, or anything similar, most investors (including ourselves) are not  looking to invest in traditional business.

While your market may be large as a training school, restaurant, etc. what is being offered is nothing different from the thousands of others already

playing the same game. 

If investors are to make an expected return on their investment, they need to know that you and your project will enter a market, disrupt it, and take a large enough share to multiply your valuation by tenfold. For this, you need to have a competitive advantage in whatever solution, to whatever problem you’re addressing. 

(4) Bad Shareholder Structure

It is critical as a startup to have a clean and efficient shareholder structure.

When things get too complicated, decisions cannot be made quickly, and when the need comes to pivot, enlarge the team, or make any quick decision you cannot move fast enough to ensure the company’s survival. 

Investors understand and often fear this and won’t support an inefficient system, even for the best of projects. 

(5) Too Optimistic

It’s important to have confidence as long as it’s founded. Getting excited and being overly optimistic about the status and future of the company

can often blind you from seeing the larger picture and potential threats to your company’s survival. 

Be confident but humble and make sure you are always looking out for the next opportunity as well as the any possible downfall. 

(6) Rely On Resources

It’s great to have resources, connections, or support in any particular industry, but ultimately doesn’t make a project

successful all by itself. 

You need to make sure that your project and company is addressing a market need by solving a key problem with an unbeatable solution. 

If instead your project is merely derived from convenience there is a good chance it won’t be able to gain the traction necessary to scale and provide value to potential investors. 

(7) Be Careful of Serial-Entrepreneurs

Serial entrepreneur is not a great term. While many think it means they have a lot of experience, you cannot overlook that it often means

that they’ve failed many times.

Experience is great and often failing can allow you to learn a lot, but there has to be a bit of moderation as well. 

If a project is changing its business model multiple times per year and following mainstream trends, most investors will immediately close up.

  A few years ago they were all doing O2O then switch to AR/VR then AI and today are starting up a blockchain project. 

Investors invest mostly on people and if they’re hopping around from each big thing to the next without providing any value to any of them, all investors will be sure to stay clear of their “next big idea.” 

(8) Lack of Focus

 It’s a common problem that entrepreneurs and CEOs want to be doing everything at all times. 

While it’s important to be capable and have understanding about all moving parts in your business, you also need to make sure that as a CEO you are

 focused on your role of leading the company and moving it forward. 

If a CEO isn’t distributing work to necessary staff and departments and taking everything upon themselves this is a clear sign that they are not focused on the big picture and, more  importantly the inevitable outcome of the project. 

Like this investors will quickly lose faith in their ability to take the startup from 0 to 100. 

1 thought on “Startups That Will Never Get Funded”

  • very good article, as my startup failed to fly, this article confirms some of the suspicions I had regarding the mistakes that led to failure.

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