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What are the chances of finding an investor?
- YOUR CHANCES WILL RISE IF YOU USE COMMON SENSE
5-2-2011 - Startups
Many times, startups ask me what are the chances of finding an investor. But typical startup chances are a meaningless number. Chances of funding are dependent on the startup. Here some reasons why most start-ups don\'t attract funding:
. 5 pct are crooks
. 5 pct are psychopaths
. 20 pct are “intellectually challenged“ and will never understand simple rules of business
. 20 pct make beginner\'s mistakes like choosing the wrong legal entity (sole proprietor, foundation, etc) and confusing a product description with a business plan. Before they have learned this basic stuff and get the attention of real investors, they have run out of gas.
. 45 pct think incorrectly that a great idea gives them a right to funding. Main problem here is arrogance, based on doing well in a specialist field, whereas to be a successful entrepreneur you need to have business skills as well.
. 5 pct can be a serious investment opportunity. Of this 5 pct, 1 pct closes a deal with an investor, 1 pct refuses to hire the relevant expertise (like lawyers) and 3 pct solves its finance problem in a totally different way.
So you see, getting funding is doable if you are not a crook, a psychopath, have average education or higher and if you are willing to add business skills to your current skill set, e.g. by listening to advice from people who know the game.
What to do?
Any startup can increase its chances of funding by doing things like the following:
. finance the seed phase out of job income
. write a business plan that at least contains an executive summary, go-to-market section and cash flow projection. These are the critical elements of a start up business plan
. work for minimum wage until break even
. put part of your savings in the company. In the venture capital world, this is called “skin in the game“. If you are not willing to do this, you don\'t deserve an investment from anyone.
. get experienced entrepreneurs on board that compensate for your lack of business experience
. stop being a stupid startup by landing your first paying customers
. if your product is still under development, go sell something else. It doesn\'t matter what. If you can\'t sell, what\'s the point of starting a business anyway?
Just some tips and if you look at it, it\'s common sense. Believe me, 99 percent of startups don\'t use common sense and that is the single most important reason why they don\'t attract funding.
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