{"id":4917,"date":"2023-03-06T13:42:43","date_gmt":"2023-03-06T13:42:43","guid":{"rendered":"https:\/\/americanmadeeverything.com\/?p=4917"},"modified":"2023-04-09T19:55:07","modified_gmt":"2023-04-09T19:55:07","slug":"doomed-to-fail-why-99-of-all-start-ups-get-no","status":"publish","type":"post","link":"https:\/\/americanmadeeverything.com\/doomed-to-fail-why-99-of-all-start-ups-get-no.html","title":{"rendered":"Doomed to fail? Why 99% of all start-ups get no investment"},"content":{"rendered":"

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\"Doomed<\/div>\n

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Who hasn't heard the success stories about startups that have secured millions in funding? But that's just the tip of the iceberg, as VC analyst David Stuck tells us: of the up to 1.000 startups that apply for VC investment each year get just 1% funded. Find out what happens to the remaining 99%, how to deal with rejections as a founder, and David's tips for negotiating with VC investors in this guest post. Finding the right investor for your company is not that easy. Why 99% of startups turn down VCs is explained by David Stuck in this guest post. A clear word in advance: This is not about the dazzling topics of the colorful start-up world, but about investment rejections and financing rounds that could only be closed in the second or third attempt. What start-up is willing to admit that?? And which VC investor boasts about an investment in a start-up whose development did not suffice for funding in the first attempt or which has already been rejected (several times) by other VCs?? But this is no wonder, because the probability of a VC investment is less than 1%. (Tens of) thousands of start-ups fight every year for an investment at the more than 100 German venture capital companies. An (early-stage) investor usually makes between 10 to 20 investments per year and rarely sees less than 1.000 Pitch Decks.<\/p>\n

In the screening process, 99% of the possible deals are sorted out by the investor. As a founder in fundraising you are always fighting against this 99%!<\/p>\n

Before applying: check your profile<\/h2>\n

The investment process is similar at most VC firms. The first step is to filter out the ideas that do not fit the profile of the VC company. Often, investors have fixed parameters that must be met, such as.B. Specific industries, financing phases (ticket sizes) or regions. Others invest exclusively in B2B or B2C business models, SaaS (Software as a Service), marketplaces, etc. Such a rejection is not a statement about the quality of the startup (which has not even been tested at this point). That's why you should continue to "apply" confidently to a (suitable) investor – although the word apply is no longer appropriate, as nowadays VC firms also compete for good startups. Consequently, start-ups that have already been cancelled end up as a new deal with a second, third or fourth investor, without their quality necessarily being poor.<\/p>\n

Tip: Better to inform in advance about the fixed criteria of an investor and easily avoid this kind of rejection. As a rule, the relevant information can be found on the website of the respective investor. Even if this kind of rejection is not based on content, you should not strain your motivation too much.<\/p>\n

If the investor has concrete questions about the pitch (deck) or invites directly to a phone appointment, the start-up is one round further. At the latest now it is about content: Business model, strategy, technology, market, traction, team and funding round. Through years of expertise, an extensive network and a broad market overview, the investment team of the VC firm can quickly address the "crucial points" of a start-up and come to an initial assessment. If this is predominantly positive, the next step is a face-to-face meeting between start-up and investor.<\/p>\n

Much more often – namely in 85% of the cases – it comes at this point, however, to a rejection!<\/p>\n

Clear rejections: no means no<\/h2>\n

For 90% of the cancelled start-ups, one or more points did not fit: Investment case too small, market too small, business model not suitable, doubts about the team, product not convincing.<\/p>\n

Tip: No means no – this also applies in the start-up-VC relationship.<\/p>\n

Avoid unnecessary lecturing of the VC, because the VC has thought through his decision long and hard. The start-up scene in Germany is relatively small and VCs well connected, so the following applies:<\/p>\n

First Impressions Count, but Last Impressions Count More.<\/p>\n

If you get the same feedback and the same reasons for rejection from several investors again and again, you should (at some point) draw your conclusions. As good entrepreneurs, don't waste time and energy discussing criticisms from VCs, but validate your business model!<\/p>\n

A second chance for start-ups on the "watch list<\/h2>\n