What To Do When An Investor Suddenly Backs Out

August 31, 2022

It is certainly a disconcerting occurrence when a potential partner decides they are not going to invest in your company. After the intense preparations and work, a rejection can be a letdown, leaving you with more questions than answers. Thankfully, there are some things you can do when that happens. 

Do Your Homework

Venture capital agreements fall through for all sorts of reasons, but don’t let it be because there is not a signed contract in place. This is a critical error that many newbie companies make – believing that preliminary talks are an indication that a relationship will be moving forward. Sometimes, you may even shake hands, but put simply, this will not be enough. If you’ve learned this lesson the hard way, simply be sure to put all intentions in writing to avoid this scenario in the future. 

Also important is to not let a lack of pertinent information be the reason why you can’t secure a deal. You need to demonstrate how your money is being spent so that your financial institution can make an informed decision. Your income statements need to show plainly what comes in and what goes out, and it is vital to show your history with spending so others will know you will steward your finances properly. 

It is crucial that you be able to articulate how your systems work, as not everyone will be familiar with the various available platforms as technology continues to advance. This can include vehicles, such as your ecommerce system, especially if it is the link that facilitates a large portion of your revenue. The ability to break down key components to your company’s structure will help to engender trust. 


Show Forward Momentum

Ultimately, your role in the marketplace is to provide your customers with a product or a service, and if you’re floundering in this aspect of your development, you will need to spend some time and hone your offering. Client research is essential, as you refine your approach. Investors will be particularly attentive to this aspect of your company and will need to feel you have a strong understanding of the forces that drive your industry. 

Part of this is to have a professional layout for the various components that accompany your endeavor. This will include your website, and it pays to have it properly designed and fleshed out. Your idea needs to be represented in its peak form, as this can lead to an investor getting cold feet. You need to believe in what you are pitching, and this needs to be shown with consistency. 

Your bottom line needs to be the focus of your strategy, as investors will need to believe that yours is a viable idea. They are putting up the money to grow your company because they see the potential for you to generate revenue. This means that they need to see a tangible customer base to whom you can appeal. You will also need to convince them that there is room for growth in your particular segment. Investors that walk away may do so because there is weakness in this area. 

Although it is difficult to accept it when a partnership with a venture capitalist does not work out, it can help to ask questions and learn from it in order to grow. You can go back to the drawing board to find out what you did right and what you did wrong in order to change it and come back better and stronger. 

It helps to have an ally in your corner for the ups, downs, and unforeseen events when attempting to get funding for your startup. We at AI Capital Advisors provide superior insight into creating the best presentation models and the needed materials to seek investors. Feel free to reach out to us with any questions you may have, and we look forward to working with you. 

Photo courtesy of Pexels

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