Closing Time: Why Investors Say No
By Connor Dawson ’25, Principal
As 2024 comes to a close and 2025 begins, many founders will inevitably be assessing their businesses and deciding to start another round of funding. Unfortunately, this is the easiest part of the process. According to the investment firm Unreasonable, only 3% of startups receive venture funding. So, what can you do as a founder to increase your odds of success?
The hard part about pitching to an angel investor or venture capital fund is that investing is binary. A founder can have a great reason for starting a business, but if the returns are poor, most funds will choose not to invest. VC funds often seek multiples of 10, 100, or even 1,000 in return on investment in 2024, and we don’t expect that to change in the future. On the other hand, a fund will also want to see that a founder is personally invested in their company. If a fund feels like this company isn’t why you wake up in the morning, they are unlikely to offer you a generous check. This is why it’s important to have a good story behind your mission and solid metrics to show that customers share the same problems you’re solving.
This binary nature is further compounded by the funding gap. Venture capital funds have increased the amount invested per deal over the past four years; however, this has come with the flip side of these funds focusing more on investing in later-stage companies. Angel investors, on the other hand, tend to focus on earlier-stage companies, but often don’t invest in slightly later-stage firms due to preference or monetary constraints. As a founder, this means the competition is thick. In 2020, one of the best years to seek funding, 4.4 million new companies formed in the US alone, while there are less than 5,000 VC firms in the US. Top firms easily review over 2,000 slide decks annually, with only a few making it to the presentation stage. As a founder, crafting a slide deck that stands out and demonstrates what your product does to separate itself from existing offerings is key. Pitching to a firm that specializes in just a few industries can also help you avoid competing with every other promising startup looking for funding.
The last thing to remember is that people tend to back what has worked in the past. Founders with experience in other successful startups can leverage that experience for their next venture. Having previous exits or being one of the first 100 at Google, Meta, Amazon, Uber, etc. are all factors that make investors feel more comfortable. Those people have had success before, and are more likely to have future success in the eyes of many investors. The same goes for organizations like Y Combinator and other large accelerators. Although we can’t all get into Y Combinator (they accept only 2% of applicants), founders can focus on strengthening what these accelerators look for to successfully communicate why their company is filling a gap in an underserved market. Many people who worked in FAANG at the very beginning now work as advisors, and they can give your firm an edge in the sea of thousands of pitch decks floating in that VC’s inbox. Networking with local entrepreneurs is a great way to meet investors face-to-face, and the more connections you have, the higher your odds of closing a deal.
Lastly, remember that there is no easy solution for getting investors to invest in your business. Sometimes the timing is poor, or you are in the same industry as too many of their other investments. However, non-dilutive funding is always a potential option. Some founders may be operating at a profit, which makes them eligible for a Small Business Administration loan. There are also several grant programs offered by the US Government and pitch competitions that reward non-dilutive funding which founders can look into. If your first attempts at funding fail, it’s important not to give up and look into other, non-dilutive methods of raising capital before raising VC funding again.
Connor is a senior from Londonderry, NH pursuing a degree in Accounting. This is his first semester as a principal, after three semesters as an associate. Outside of the fund, he has professional experience as an audit intern with Marcum, with a focus on audits of local municipalities. Connor is excited to return to the Fund, and to utilize his audit skillset to produce due diligence reports for some of the nation’s brightest entrepreneurs.
