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Friday, May 24, 2024

7 Fundraising Challenges Faced by Entrepreneurs

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Alan Safahi, a startup founder in San Francisco and an experienced entrepreneur, says a promising startup requires unique business models and innovative products. Although most entrepreneurs focus on business models, Alan Safahi Orinda says that they ignore concentrating on fundraising. While fundraising is essential, it comes with many challenges.

1.     Lack of Patience

Most entrepreneurs want to raise funds quickly, which prevents them from attracting reliable investors. A lack of patience can prohibit you from building an experienced and skilled team of industry professionals. As a result, you don’t gain traction, market share, and key metrics to prepare a more in-depth pitch.

2.     Finding the Right Investor

According to Alan Safahi, each investor has different investment preferences, including the industry, the money of money they want to invest, level of risk, and investment timelines. Therefore, most entrepreneurs do not perform proper homework to find the right investor for their company and don’t know how to reach them.

3.     Low-Performing Pitch

Although no pitch is perfect, Safahi says if your pitch has gaps like flawed assumptions, customer analysis, and ineffective strategy, you won’t attract a reliable investor. Beginners usually don’t know how to eliminate red flags, such as acquisition predictions, lack of knowledge on competitors, and not asking for a nondisclosure agreement.

4.     No Funding Strategy

Most investors develop their strategies to support some businesses over others. Safahi says that entrepreneurs need their own strategy when raising funds. For instance, focus on business areas that require improvement and develop a plan that focuses on putting the capital towards the essential ones. Because entrepreneurs do not focus on metrics, they don’t know how to answer investors’ questions or give them a timeline for the future.

5.     Lack of Planning

Safahi says raising funds is a significant undergoing and requires you to reach out to connections constantly and schedule meetings. Although most entrepreneurs focus on improve their pitches, they don’t meet angel investors and ignore planning future funding rounds on using the capital. All this can lead harm your business and prevent you from raising capital. 

6.     No Articulation of Funds Requirements

According to Alan Safahi, entrepreneurs who fail to substantiate or articulate funding requirements usually don’t raise enough funds for their new business. The primary reason behind this is that you don’t think from the lender’s perspective. Remember, the lack of preparation or substantiating funds requirements makes it challenging to analyze facts and figures, leading to a failed lending process.

7.     Using Unsolicited Emails

Safahi argues that entrepreneurs who use unsolicited emails fail to connect with angel investors. Because investors receive thousands of emails every month, they ignore the unsolicited ones. Consequently, you get lost in the crowd even if you have an excellent idea. Therefore, make sure your email comes from a trusted investor or referral. Otherwise, potential investors may not consider your proposal.

Final Words

According to Alan Safahi, most fundraising performed by entrepreneurs is activity-centered instead of result-oriented due to an ineffective framework, less credible pitch, and lack of communication.


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