It is not unusual to pitch a business idea to a group of investors only to have some of them be more receptive than others. The non-receptive investors can demonstrate everything from ambivalence to outright contention. Some can prove to be a tough sell no matter how much work you put into your presentation. But why?
A lot of it has to do with personality. There are just some people who are not easily swayed. Even sound due diligence that produces a ton of favorable data may not be enough to get them on board. That’s just the way it is. But beyond personality, there are very legitimate reasons investors demonstrate caution. Below are five of them, provided by due diligence-as-a-service provider Mezy.
1. Preserving Their Cash
Investors must always be cognizant of their cash flow. The more cash they have tied up in projects, the fewer new projects they can take on. At any given time, there may be one or two investors in a particular group that seem resistant to your idea. They might just be preserving what little cash they have left.
This scenario is actually quite common in down markets. When economic activity is slow and inflation is high, investments are harder to come by. Investors hoard their cash while they wait for market conditions to improve.
2. Limiting Their Risk
Another possibility is that you have run into investors that, while they are exploring opportunities, are working hard to limit their risks. The thing to understand here is that most investors pursue a combination of low- and high-risk opportunities. You may have just happened upon one or two who already had enough high-risk investments in their portfolios. At the time you pitched them, they were looking for something safer.
3. Looking for Short-Term Gains
There are times when stock market investors are out there buying up everything they can get their hands on. Generally speaking, it is because the market is on the low end of its most recent swing. They are expecting it to start climbing again in the immediate future. They are buying everything they can in hopes of a significant short-term gain.
The thing about angel investing and venture capital is that both tend to be long-term. This may not sit well with investors who are really after something short-term. If you can offer them a good return and a quick exit, okay. But if not, they might not be interested in funding your enterprise.
4. A Specific Focus
Yet another possibility is that your idea doesn’t represent an area investors are interested in. For example, hard-sell investors sometimes choose to focus on a particular industry or type of business. You may have a fantastic idea with plenty of potential. But if your company doesn’t fit the investor’s focus, you might find them tough to convince.
5. Wanting More Than You’re Offering
Sometimes hard-sell investors want more than you can offer. Maybe one investor wants a significant role in directing your company in exchange for funds. Perhaps another wants a higher return than you’re willing to agree to. All of this is normal. Securing investment capital often boils down to negotiations. Sometimes, you just can’t give enough to make investors happy.
There are those investors that seem willing to get on board with any project that strikes their fancy. Then there are others who seem to be a tough sell. It takes all kinds to make the investing world go around. Do not take it personally if you encounter investors who seem unreceptive. It happens.