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Reasons startups don't get funded in the idea stage anymore

2017-08-05 13:23:05 | Legal Services

In general, the startups that are however still in the idea stage , and the fact that they are getting funded is considered as a completely dead practice.

The purpose of this article is to make the reader aware of the reasons as to why the startups don’t get funded in the idea stage anymore.

The following are the reasons :
1. Lack of a compelling story. That story however has to begin with a painful problem which is thus shared by a large collection of viable customers, with the competitive solution. Additionally, one thus needs to be able to communicate the essence that story and also value to the investors in a couple of sentences – the elevator pitch.
However , a lack of compelling story is thus a reason as to startups not being funded in the idea stage.

2. Lack of the clear objectives/goals. Often, the number one question that the entrepreneurs generally fail to address is as to “How much money does one need, and as to what valuation does one place on the company?” Then also one has to have an evidence in order to support the request. Generally , one would often get a blank look if one asks this question many times from the presenters in angel meetings .

3. Failure in order to prepare for due diligence. Any serious investor will thus also perform a thorough review of the business and also a personal background before however signing the check. They thus also don’t like surprises, so one should thus explain any possible issues first, and that too in the best possible light, before thus being asked.

4. Lack of understanding of the funding process/rules. The key here is thus in order to create a win-win partner situation for the investors. Discussion of the risks and the rewards in an open fashion, without any sleight-of-hand or shortcuts, will thus also convince the investors that they can thus count on one , and will thus also avoid the shareholder lawsuits later.

5. Reliance on the inappropriate business professionals. Using a well-respected professionals in order to bolster the endeavor is thus the key. If one can however attract well-known advisors, attorneys, and also accountants, it will thus give the potential investors comfort that one however has been able to get implied endorsement of the concept, and also as well as the integrity.

6. Poor choice of funding sources. It is thus also not helpful to one for the funders in order to love an idea that thus does not fit the criteria for their investing capability. One must also not waste their time in talking to the VCs for the requests less than $1M, or the very early stage, and should thus also not expect the professional investors in order to jump in if one thus has no “skin in the game.”

7. Not doing due diligence on the funding source. One thus also is required however to complete due diligence on the prospective funders as they however complete due diligence one . One must thus also find out as to what they have invested in recently, at what stage, and thus also what is their track record of the expectations and thus also follow-through. One thus also doesn’t need surprises or thus disappointments either.
8. Being unprepared for the next steps. Thus after a good elevator pitch or an initial presentation, investors will thus ask for the formal business plan and thus also financial projections. One must thus also not derail their enthusiasm or either risk the professional image by however not having these materials immediately available. The same thing thus goes for however incorporating the company, having the key hires lined up, and also the facilities arranged as required.

The process of getting funds at the idea stage has thus however become byzantine and laborious and is also fraught with peril. And if one doesnt thus however have all the little boxes checked, it however just won’t happen.
Really stupid ideas thus don’t get funded, because one however sort of have to prove as to why they work first.
But if one has thus got something that’s however more than half a standard deviation from the norm that’s however going to be harder. Much much harder.
One however can’t fund the ideas, or a team with a track record, thus just on its face, any more.

This article has been contributed by Simmi Setia, Content Writer at LegalRaasta, an online portal for Section 8 company registration, Nidhi company registration, IEC registration.

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