Hiruy Amanuel Describes 10 Red Flags That Tell You Your Small Business Will Have Troubled Funding
One of the most exciting and terrifying parts of the startup process is fundraising. But it may not always feel that way, and your business may not be ready for outside capital just yet. Based on his own experiences, experienced investor Hiruy Amanuel details ten red flags to look out for when it comes to funding troubles.
1. Target Audience Isn’t Growing
It can be hard to have a strong target audience before you’ve launched your product or service. However, having even a few solid customer testimonials or potential client input can go a long way in showing investors your company’s value.
2. Unmet Goals
Every new business needs to set specific, measurable goals for itself. If you haven’t done this yet, or you’ve set goals but then totally forgot about them, it’s a problem for investors. They need to see progress and problem solving, and hitting milestones shows this.
3. Lack of Investor Meetings
If you can’t find people to take the time to sit down and listen to your business’s vision, you need to change your approach. Perhaps your summary is too vague or too detailed. Or maybe you’re targeting the wrong type of investor and need to go back to the drawing board.
4. Losing Key People
When your business is just starting up, keeping quality talent that you can trust is essential. If you start losing key team members, try to discover why it’s happening and what you can do about it. When the employees don’t necessarily believe in the business’s future, how can anyone else?
5. Difficulties Recruiting
On the same note, if finding new talent isn’t panning out, it’s another red flag that funding won’t go well either. It can be a challenge to provide the right incentives to recruit new members, but if you’ve got your plans laid out and are realistic, it shouldn’t have to be.
6. Limited Finances
The financial battle of staying out of the red can be an all-consuming facet of entrepreneurship, but it’s also a sign that getting more funding will be tough. If you’re spending more than your potential earnings, investors will notice.
7. Cap Table Concerns
A limited cap table analysis of equity and percentage of ownership indicates a weak capital structure, which investors aren’t keen on supporting. Instead, creating an intriguing business model and aggressive marketing plan can show potential supporters your business will ultimately be worth their time and money.
8. Unclear USP
Your company’s unique selling proposition (USP) articulates the distinct value you can offer to investors. Investors won’t have a reason to dive in headfirst if you can’t clearly explain what sets you apart from the other fish in the sea.
9. Slow Market Growth
Without proper data analysis and strategic planning, you may find your company in a limited marketplace or stagnant growth. Investors will recognize this pitfall and consider any support from them as futile. Instead, take the time to assess and analyze your proposed market to ensure your business can grow over time.
10. Few Follow-Ups
Maybe you’re landing meetings, but then there’s no follow-up. This red flag suggests you’re not meeting with the right kinds of investors, or you’re not communicating your company’s niche. Either way, you need to reevaluate how you select potential investors and develop a new plan.
About Hiruy Amanuel
Hiruy Amanuel is a technology expert and a devoted philanthropist. Amanuel believes that there will be rapid development of groundbreaking technologies throughout the Horn of Africa as access to quality education and technology increases. He has invested in numerous educational and technological initiatives in East Africa.
