5 Top Reasons for Declining Funding From Investors

The Startup India Initiative from Prime minister has a vision of making India ‘self-reliant’ by giving boost to ’Startups’.  Startups entrepreneurs are being given exposure to various aspects of the Startup in workshops that are being held in various parts of the country.

Important questions tackled here are:

  • What makes a startup fundable
  • Developing Business Model
  • Drawing the Business Model
  • Business Plan- An Investor perspective
  • Art of presentation of the Plan to Investors
  • How to keep things simple

These seminars do give a peek view to an entrepreneur journey.  The vital question here would be would this be enough? Do you have answers to all your questions? Questions keep rising with time to time which needs you to find answers.

Enthusiastic Entrepreneurs are trying to get funds at very early stages without giving a chance for themselves with bootstrapping.

Money from Investors always comes with the baggage of expectations set by them to you and obligations from your side towards them.

Implications on Startup on taking funds from Investors will be:

  • Percentage in the Company
  • Time durations will be set for fund flow
  • How and when the shares will be sold

Implications on You as an Entrepreneur will be:

  • Curtail in your freedom to run your Startup
  • Timely communication has to be maintained
  • Timely progressive Reports needs to be communicated

Startup is not just ‘Yours’ anymore

Apart from the like-minded individuals and a team which you would have formed in your Startup will not be enough anymore. A Board of Directors will be set wherein you need to take approval for strategic decisions to be made in the Startup. Investors would like to have one member from their side and will demand the regular updates on key issues raised.

Every fund transfer has progressive milestones attached

Every fund flow is followed by a set of milestone commitments for the term. This cannot be taken lightly as Investors can take a call on stopping the fund flow. Your seat as CEO of your Startup will be put to stake.

Your ‘Time’ is not completely yours anymore

Startup consumes all your time, energy and attention. But once you are with Investors there will be demand for your time to know how things are moving? This really is quite a task as it eats up quite a lot of productive time of yours but will be a norm that needs to be followed.

Communication with Investors should be kept at regular intervals and being proactive about the events. Nobody wants to lose money, they need to be reassured that things are going smooth and there are no bottlenecks.

Need for transparency

As it is a known fact, there are going to be obstacles in any Startup. It is human tendency to hide it to just keep the work going and gaining time to solve the issues. Any issue that is hidden from the Investors is not taken lightly. This does not go down well with them and backfire on you too. There can be quite a few legal issues attached with this.

Accounts

Maintaining Balance sheets would be even more important now than before. Every penny has to be accounted, spent wisely and updated in the accounts.

The Investor’s money does give a boost to the Startup. But it also brings in additional responsibilities and heavy risk. So think twice before going to the Investors and have cautious approach while agreeing for the norms being set in legal documents before signing on the dotted line. One bad decision of yours can leave you with heavy debts with legal strings attached to it. The situation is similar to walking on the tight rope trying to balance about making your dream a ‘reality’ at the same time assuring investors for good returns for the money invested.

— Team SoS

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