Three Reasons Why Entrepreneurs Fail to Secure Funding

Fundraising is a daunting challenge, even for the best finance professionals, and downright scary for startup founders with no finance experience. According to Fundable and Entrepreneur, 565,000 startups are launched every year and just under 3% receive angel and VC investments. Entrepreneur identifies three main reasons startup founders fail to secure funding that we further address in this article and the corresponding video.

Most startup founders don’t know finance and can’t properly translate their business plan into proforma financial projections. The reason is obvious: in order to create a disruptive product, you must be REALLY good at what you do, and you can’t be REALLY good at everything.

However, this gap in expertise leads to founders not effectively communicating their vision to investors in the language that investors understand – which is finance and accounting. Investors relate infinitely more to details on unit economics and valuations than the intricacies of a complex C++ algorithm.

The Startup Station specifically focuses on addressing this gap.

Finding the right people – the people whom you can trust, who share your vision, and who are experts in what they do is not an easy task for any company but is especially critical for a startup.

Once you put together the right team, we recommend being creative and open in how you utilize them because you only have access to a limited number of people. Yes, of course, you want to use your teammates for their core expertise. After all, that is why you brought them on board. But as we know, “Two heads are better than one!”, and asking for their feedback even outside of their immediate competency can give you the necessary outside perspective to make an optimal decision.

A Board of Advisors is another often underutilized startup resource that enables the founders to progress faster, access a greater network of contacts, and lend additional credibility to their venture. We address it further in this blog.

Formulating a clear measurable go-to-market strategy for a company with no brand awareness, no product on the market, and no users is very hard. Fortunately, a robust financial model can effectively address this problem.

The process of creating thorough financials guides you towards refining your business plan to the point where all components of your business strategy, including your marketing strategy, can be expressed in precise quantitative terms and provide a logical measurable representation of your plan of action.

Victoria Yampolsky, CFA, is the President and Founder of The Startup Station, a comprehensive resource for modeling and valuing early-stage startups. She evaluates the financial feasibility of business models and specializes in the financial modeling and valuation of pre-revenue companies. She also created a finance curriculum for early-stage founders and launched The Startup Station’s educational program in 2015. Since then, more than 1,000 founders have attended her online and in-person finance classes and learned the basics of financial modeling, valuation, and startup financing.

Previously, Victoria worked for the Deutsche Bank Research Department and performed IT consulting for CapGemini’s Financial Services Division. Victoria holds a Bachelor’s Degree, Cum Laude, in Computer Science, with a minor in Mathematics, from Cornell University and an MBA, with honors, from Columbia Business School. Victoria is also on the Advisory Board of the Computing and Information Science (CIS) Department of Cornell University.