Why do some start ups fail?

For every business that makes it, there are hundreds of brilliant ideas that never see the light of day. We see dozens of startups register each week in search of help to accelerate their business. Many of these have great ideas, so why do so few startups ever make it. Here is a short list of a few possible reasons.

1. Right Product – Wrong Time

Being the first to market is not always best. In 2004, serial entrepreneur David Cohen launched the beta version of iContact, a social network for mobile phones. After 18 months of trying to get phone carriers to distribute his software, he had to shut iContact down and return 80% of his investors’ money. What happened? David, along with many others, thought that mobile and GPS were at their tipping point of acceptance and that mobile carriers would jump at the chance. Unfortunately, they didn’t and his timing turned out to be 4 years too early.Right Product – Wrong Time.

2. Need some help

Every entrepreneur needs a mentor. They have been in your situation before; they can provide access to valuable contacts, and help to keep you on track. That being said, a single mentor is not enough. Entrepreneurs need to find several (at least 2-3) business advisors that can help them strategically think through critical decisions for the business and challenge them when needed. The best advisors will be an honest sounding board for entrepreneurs, providing their expertise and applying their experience to your business in a way that benefits both your startup and their own professional development.

3. Keep the costs down

Overhead is the one area where a small business owner actually has control. So why does this consistently become a challenge for so many? One of the primary ways that startup businesses get into trouble is the need to have enough inventory or people “just in case” demand suddenly rises. The cost of holding excess parts or unnecessary labor can add up fast. If £20,000 is spent on inventory, and that inventory sits in a warehouse for several months, that’s £20,000 that could have been spent on other aspects of your business.

4. Rush to show revenue

Warren Buffet has been known to say that he has two rules of investing: “Rule one – never lose money. Rule two – never forget rule one.” Understandably, an entrepreneur may feel pressure to put up big revenue numbers to prove to investor(s) that they have made a solid investment. Be realistic. All new businesses go through stages of growth, and a good investor knows this. The birth of a new business involves a lot of giving without expecting anything in return (at least in the beginning). Entrepreneurs need to come up with reasonable annual goals with milestones they should hit along the way toward reaching those goals. Communication to investors about progress against those plans is critical. Keep your eye on the big picture and focus on the present.

This list can easily be expanded and argued. It’s not easy to succeed as an entrepreneur. If there was a fail-safe success plan to starting a new business, a lot more brilliant ideas would make it to market and there would be many more amazing success stories than the ones we hear about. But, as we know history is likely to repeat itself. So entrepreneurs, learn from the failures of those who have gone before you and apply those lessons (such as those above) to your own startup.

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Angel Investment News

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To stay updated, come follow us on Twitter: http://twitter.com/angel__network

 

50 Quick Tips on Raising Angel Funding – Part 2

  1. Avoid general statements, such as “We will provide excellent customer service” or “I am very hard working”.  Everyone could make these claims. 
  2. Do due diligence on any investor you’re thinking of doing a deal with.
  3. Try to target angel investors with experience in their industry – their expertise will be invaluable.
  4. Expect the angels to want an active day-to-day role to share advice, knowledge & expertise.
  5. Ask for a non-disclosure agreement to be signed if there is any information you feel uncomfortable disclosing to the investor.
  6. Remember no legitimate investor will ask you to pay money.
  7. Be completely open from the beginning.  If an investor finds a skeleton in your closet, the deal will be off.
  8. A market with high growth potential is very attractive to investor.
  9. Start your pitch with “a hook” – a statement or question that grabs the investors’ attention and makes them want to hear more.
  10. Don’t write “No Competition”.  There is always competition, even if it is indirect competition.
  11. Be enthusiastic – Investors expect energy and dedication from entrepreneurs.
  12. Don’t use acronyms – people outside the industry won’t know what they mean.
  13. Gestures, body language (e.g. nodding and smiling) and confidence are very important when you’re speaking to investors.
  14. Ask family, friends and colleagues for feedback about your business plan and pitch.
  15. The more you practice your pitch, the more relaxed you’ll be when you’re in front of the investors.
  16. It’s really worth spending money on a good lawyer.
  17. Don’t be afraid to admit your weaknesses and admit you may need help in certain areas or strengthen part of your team.
  18. Use short paragraphs, bullets and lists: This makes it easier and quicker for the investors to read.
  19. Don’t write “Guaranteed Return”.  No return is guaranteed!
  20. Check your business plan for spelling and grammatical errors they make you look unprofessional.
  21. Don’t say “My projections are conservative”.  90% of companies say the same thing.
  22. Make sure you have legit market research to back up your claims about market size and competition.
  23. If applicable, investors will want to see that you have the necessary patents and protection in place.
  24. Don’t say “We only need a 1% marketshare to have a turnover of 1 million” – financial projections don’t work like that.
  25. Last but certainly not least (here comes the sales bit), visit www.angelinvestmentnetwork.co.uk if you need any help raising funds.  In the top right corner, you’ll find a drop-down list of all our networks around the world.

Angel Investment Network’s Weekly Twitter Roundup

Angel Investment News

Business Plans & Pitching

Fund Raising

Marketing & Social Media

Start-Up & Entrepreneurship

To stay updated, come follow us on Twitter: http://twitter.com/angel__network