4 Reasons Why Start-ups Fail to Raise Funding

Posted by Roma Arora in Entrepreneurship
April 17, 2018

There are many reasons why start-ups may not be able to raise funding. These could be related to profitability, growth, team building or even resource management. While start up success stories is covered throughout online media, it’s important to understand why many start-ups fail to raise funding.

Unclear business model:

Some of the top management schools in Delhi focus on developing a coherent business model. It’s the foundation for a successful business, and it’s the key to raising capital. Having an unclear business model is an important indicator that fund managers look out for. They don’t want to invest in a risky venture, especially one that doesn’t yet know where it’s going.

MBA colleges in Delhi

That’s why it’s imperative to get a quality education from some of the top universities in India for MBA programs. An MBA in entrepreneurship from a university like IILM ensures that you’re ready to answer any and all questions about your start-up’s business model.

Lack of a strategic vision:

Although strategic vision comes with age and experience, a complete lack of one is a major reason why start-ups fail. Venture fund managers are looking for companies that have big ideas. They like to invest in something that can provide them big returns in the future.

A lack of strategic vision can also be seen as a sign of weakness in the management bench. If a company doesn’t have the right strategic vision, it may be seen as being less favourable when compared to competitors.

Ineffective communication:

Simply communicating your brand to venture capitalists can be a problem for many founders. That’s why communication skills are necessary to obtain early on in your start up career. Your presentation could be incomplete, your strategy could be misinterpreted, and your technology may not have the right market-fit at this point.

It all boils down to communication and how best you can develop a relationship with the venture capitalists that you’re engaged with. Communication is also important when you’re trying to pivot, as it can mean a complete overhaul of how you present your brand to investors.

Poor business ecosystem/network:

Sometimes, it’s unfortunate but the eco-system around that start up isn’t conducive for business. Whether that’s a bad market or a slump in the industry, there are eco-system factors that can add pressure to a business’ success.

Many times, companies fail because there isn’t enough support from governmental factors. Other times, they fail to generate growth because of lack of networking. These warning signs detract quality investors from funding these start-ups.

Conclusion:

It’s important to understand the reasons why start-ups aren’t able to raise funding. They could range from lack of profitability, stable growth or increase in competition. Entrepreneurs must obtain a quality education from a top MBA school to alleviate the worries of top tier investors.