"Red flags" that cause startups to lose favor with investors.

Meeting with investors is a valuable opportunity, but not every start-up can take advantage of it to make a good impression; on the contrary, some may even "lose points" in the eyes of investors.

"Red flags" that cause startups to lose favor with investors.

Meeting with investors is a valuable opportunity, but not every start-up can take advantage of it to make a good impression; on the contrary, some may even "lose points" in the eyes of investors.

There are many "red flags" that cause investors to immediately reject a start-up without much consideration. These signs sometimes don't come from the business plan itself, but rather from the founder's presentation style, vision, and team structure.

One of the most common reasons is a lack of thorough preparation and overconfidence about the target market. When meeting with investors, some founders often claim that their startup is tapping into a new market with no competitors. But in reality, competitors exist everywhere, directly or indirectly. If there are no competitors, it's highly likely that the market the startup is targeting is too small and not attractive enough, or the startup hasn't spent enough time researching and therefore doesn't know who its competitors are. Whatever the reason, the startup's lack of thorough preparation has caused investors to back out and not want to continue the discussion.

Another disadvantage comes from the product or service aspect. If a start-up cannot demonstrate the strengths or competitive advantages of its product compared to other companies in the same field, investors will not see the unique value of the project.

Conversely, startups often emphasize that their products are better than competitors because they have more features, which might seem like an advantage, but it's actually a disadvantage. Investors understand that the number of features isn't as important as whether those features meet customer needs. Many products have 10 features, but only one is useful, making them far inferior to products with only 3 features that are all popular with customers. The most effective approach for founders is to demonstrate how each feature of the product is received by customers and how frequently it is used.

Besides the two issues mentioned above, the structure of a start-up is also a decisive factor in whether investors have a positive impression of it. A founding team with a clear distribution of skills and experience, coupled with complementary and supportive relationships among members, will always be highly valued by investors.

Meanwhile, even if a startup has a good product, a chaotic and unstable team will still lead to investor rejection. For example, a startup might have five co-founders, but none of them hold the official CEO position. When investors ask, "Who is the CEO?", no one takes responsibility; only one person says they are temporarily holding the CEO position and will hand it over if the startup finds a suitable replacement. This is a major drawback, as investors may choose to invest in a more capable company rather than spending money to find someone else to be CEO.

Another sign that investors reject startups is a feeling of lack of transparency and honesty during the exchange process. If the founder cannot provide accurate financial figures, or avoids answering questions about crucial aspects of the startup such as the number of customers, revenue growth rate, profits, and the cost of acquiring new customers, investors will feel concerned about the project's credibility. When they don't find honesty and transparency in a startup, investors are ready to withdraw from the very first meeting.

Therefore, to avoid the aforementioned "red flags," founders need to meticulously refine everything from market research to the founding team, product, and financial figures. Only by doing this can startups increase their chances of securing investment in today's challenging environment.

Source: https://baodautu.vn/dau-hieu-do-khien-start-up-mat-diem-trong-mat-nha-dau-tu-d231628.html