5 Reasons Investors Aren't Knocking Down Your Door

By having the right building blocks, you can vastly increase your chance of getting funded.

learn more about Tallat Mahmood

By Tallat Mahmood

Opinions expressed by Entrepreneur contributors are their own.

Securing equity investment is often a prerequisite for many businesses that want to grow. However, many companies fail to secure funding, often signaling difficult times and even the end of their company.

How can you make sure you have the best chance of securing funding for your business? If you can overcome these five roadblocks, your chances of an investor writing a check will greatly increase.

1. Weak team

Investors invest in people; the business is second. If a VC can trust you and your team to deliver value for all shareholders you have won half the battle. But how do you gain their trust? Your track record will speak for itself and will mitigate risk for the investor.

Related: The 3 Ingredients You Need to Impress a VC

Action step: Sit down with your team and highlight areas where you have created value in previous ventures or roles -- individually and as a team. If you have not worked with your current team previously then present examples of successes you have had in your current partnership.

2. Irrelevant offering

Is the product or service you are working on really solving a problem in the market? Demonstrating a clear need for your solution will be key to getting an investor. This proof point helps them understand the value potential of your business.

Action step: Give three real world examples that the problem you have identified exists. The examples could involve customer feedback. Now write down current solutions and explain why each fails to solve the problem compared to your offering.

3. Ambiguity around how you make money

Can you demonstrate how your business makes money? This is the bottom line for any investor. The product, market and plan are all fine, but at the end of the day, you need to demonstrate how you will create value for shareholders.

Action step: In one sentence write down the means by which your company makes money. This could be licensing fee, a subscription model, a commission arrangement or by some other means. Develop a flow diagram of how the exchange works of your product or service with customer money to help you articulate this.

Related: 5 Steps to Identifying Potential Investors That Are Right for You

4. Minimal opportunities to scale

Investors want to invest in something that can scale. For this to happen, the market you operate in has to be big enough to give you that opportunity while allowing share for competitors, too.

Action step: Do your research to determine what your total addressable market is and what analysts believe to be key drivers for your space. Investment banks publish research reports on markets that are freely available. A quick way of finding this information is to do a Google search. For example, if you are in the tech sector, type in "technology investment banks. " Secondly, you can do a separate Google search with the following string: inurl: filetype: pdf. You insert a name in the investment bank field, for instance, GP Bullhound Review (inurl:gp bullhound filetype: pdf). This returns a number of research reports published by GP Bullhound. Review, cite, and use the most recent to fit your purpose.

5. No discernible strategy

Having a clear strategy instills confidence in an investor. In truth, this comes from a juxtaposition of many of the roadblocks highlighted above. For example, you can't have a strong team that has no idea of strategy. Or a strategy that doesn't consider the market it operates in.

It doesn't matter if the strategy you have ends up being wrong and you have to change it. But at least having a plan in place that can be followed will give an investor confidence.

Action step: Sit down with your senior team every three to six months in the early stages of your company (less frequently later) to review the strategy you have in place. Make sure it execute based on how you are doing and what is happening in the market. When the strategy is not working, you will be better placed to act quickly and change things.

Raising investment is not impossible. In fact, it's relatively easy when you have put together the right building blocks and are prepared.

What other steps are missing? Leave your comments below.

Related: Watch Out for These 9 Seed Funding Gotchas

Tallat Mahmood

Founder of Growthologie

Tallat Mahmood is the founder of The Smart Business Plan Academy, his online course on building powerful business plans for small and medium-sized businesses to help them grow and raise capital. Tallat has worked for more than 10 years as a small and medium-sized business advisor and investor.

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