5 Reasons Why Companies Fail to Raise Capital

November 25, 2020
Marene Ter

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It is way past midnight (the joys of working with international companies while based in Australia …).

I am sitting in front of my laptop, my Zoom meeting active with 8 icons of faces — some new, some familiar — and a Powerpoint slide centered on the screen.

One of those screen faces is mouthing somewhat incomprehensible words as I struggle to follow his pitch, while my eyes scan the slides for clues to shed some light on his ramblings.

I have seen this deck before. It is what sparked our initial interest to agree to meet with this company (let’s call them Company X), who is seeking $65M in growth capital.

Yet somehow at this very moment, I feel my eyes glazing over and my attention drifting to a more interesting universe in my head. I glance at the time displayed on the top right corner of the screen and my mouth falls open in utter shock. How is this possible?

Only 5 minutes have passed since this screen face began talking, yet it felt like I’ve traveled to the end of the galaxy and back!

I scan one of the screen faces, who is our chief investment officer. His expression says it all.

There couldn’t be a blanker look on his face.

Perhaps he went to the same universe I drifted off to and we could reconvene there to share our discussion notes.

It looks like I was not the only one who was lost during this pitch.

After what seemed like a hundred years which, in reality, was only a one-hour virtual meeting, the CIO sends me a message that confirms what I have been thinking all along:

Interesting product — but, hard to see the value in this team. Also, the pitch was terrible.

The stark reality is — the majority of companies that have the opportunity to pitch to high-level investors who can catapult their growth will often bomb their chances miserably. And over time, I’ve come to realize that there are many reasons why, and here are 5 of these reasons (yes, there are more …):


1. It’s not about your product

Photo by Franck V. on Unsplash

Understandably, you and your team are extremely passionate and absolutely believe in your own product or service. After all, you have spent years (for some, even decades) brainstorming, nourishing, nurturing, developing, upgrading, refining, and perfecting your product.

You could develop the best product in the world, but if no one buys it or invests in it you may as well have built a dud.

The difference between a company with a product that generates mild interest and a company with a product that has people rushing to buy it in droves (think Apple) is that the latter understands how to position their product to their ideal target clients.

They understand in the most profound way what their ideal clients desire and what their deepest needs are.

They understand down to the most granular detail what motivates their clients, how they feel, think, and react, and how their product fills this gap perfectly.

Creating innovative solutions is ultimately about how it can serve and impact the lives of your clients.

So — it’s not all about your product.

Understandably, you and your team are extremely passionate and absolutely believe in your own product or service. After all, you have spent years (for some, even decades) brainstorming, nourishing, nurturing, developing, upgrading, refining, and perfecting your product.

You could develop the best product in the world, but if no one buys it or invests in it you may as well have built a dud.

The difference between a company with a product that generates mild interest and a company with a product that has people rushing to buy it in droves (think Apple) is that the latter understands how to position their product to their ideal target clients.

They understand in the most profound way what their ideal clients desire and what their deepest needs are.

They understand down to the most granular detail what motivates their clients, how they feel, think, and react, and how their product fills this gap perfectly.

Creating innovative solutions is ultimately about how it can serve and impact the lives of your clients.

So — it’s not all about your product.

It’s about serving your ideal clients

Understandably, you and your team are extremely passionate and absolutely believe in your own product or service. After all, you have spent years (for some, even decades) brainstorming, nourishing, nurturing, developing, upgrading, refining, and perfecting your product.

You could develop the best product in the world, but if no one buys it or invests in it you may as well have built a dud.

The difference between a company with a product that generates mild interest and a company with a product that has people rushing to buy it in droves (think Apple) is that the latter understands how to position their product to their ideal target clients.

They understand in the most profound way what their ideal clients desire and what their deepest needs are.

They understand down to the most granular detail what motivates their clients, how they feel, think, and react, and how their product fills this gap perfectly.

Creating innovative solutions is ultimately about how it can serve and impact the lives of your clients.

So — it’s not all about your product.

Understandably, you and your team are extremely passionate and absolutely believe in your own product or service. After all, you have spent years (for some, even decades) brainstorming, nourishing, nurturing, developing, upgrading, refining, and perfecting your product.

You could develop the best product in the world, but if no one buys it or invests in it you may as well have built a dud.

The difference between a company with a product that generates mild interest and a company with a product that has people rushing to buy it in droves (think Apple) is that the latter understands how to position their product to their ideal target clients.

They understand in the most profound way what their ideal clients desire and what their deepest needs are.

They understand down to the most granular detail what motivates their clients, how they feel, think, and react, and how their product fills this gap perfectly.

Creating innovative solutions is ultimately about how it can serve and impact the lives of your clients.

So — it’s not all about your product.

It’s about serving your ideal clients.


2. The wrong advisory

It pains me to say this, but so many companies fail to move in the right direction because of the wrong advisory group or partner they have onboarded.

Don’t get me wrong — having the right advice from the right people can save you years in time and millions in cash.

As entrepreneurs and investors, we understand and master the power of leverage— leveraging time, leveraging expertise, and leveraging money.

Let’s go back to that Company X, which was presented to me by an advisory group seeking assistance in raising capital for this company.

Company X has an innovative product with applications across multiple industries and was engaged to this advisory group with a promised return of equity share plus a fee from a successful raise.

Their target raise was USD$65M. However, the advisory group did not have real investors backing them, which is a commonly recurring theme we encounter in this space.

During the pitch presentation, it was clear that the team had no clue at all how to pitch to investors.

There was a complete lack of awareness as to what would captivate an investor’s interests.

Despite this, we could see the potential of the product and thus proposed to move things along, provided they were given the right guidance (and coaching on the pitch).

However, while the founder and team of Company X were keen to proceed with our investment process, the advisory group that had engaged with them became an obstacle for the execution of a capital raise from our side due to their own deal terms, which conflicted with ours.

This was definitely a huge loss of opportunity for Company X.

Needless to say, they did not manage to raise the $65M they set out for.


3. Pitching to the wrong crowd

Prior to the lockdown, investment forums and pitch events are attractive target destinations for budding, aspiring companies seeking to raise capital.

Having attended many of these events where companies pay a large sum (often between US$15,000 to US$75,000 per event depending on other additional marketing and branding features they wish to include) to present and pitch to a roomful of potential investors, some of these events are analogous to blindly throwing a large, holey fishing net in the ocean and hoping to catch the great white shark. Many of these events also have a higher ratio of project owners to investors.

If you are a project owner, unless you have great networking skills to personally connect with, or better yet — be directly introduced to potential investors, your chances of raising substantial capital during these events are very low.

Don’t discount the power of great networking and connecting skills.

Business is a human-capital game as much as it is a financial game.

What’s worse — in some cases, there are attendees that masquerade themselves as potential ‘investors’, when in fact they are there to solicit clients.

Do extensive research before attending these events.

They often cost a lot, and it pays to know who the key decision-makers are and know who you are (and should be) talking to.

Again, whether it is an event or a private meeting — spend time getting to know your audience.

The more you understand the psyche of your audience and who you are talking to directly, the more you’ll be able to successfully convince them of the value of your product or service.


4. The real problem isn’t a lack of capital — it’s the business model

Think WeWork. Prior to their IPO, they were certainly not short of investment capital.

Often, a project owner thinks their greatest problem is a lack of capital.

Of course, money solves many things.

But an injection of capital does not fix a bad business model.

Take the WeWork case, for an instance. It is certainly an eye-opener that disrupts the commonly held desire amongst startups to achieve their unicorn status asap.

Granted, it only occurred last year but the news about their IPO, which subsequently unleashed a whole can of worms, has been so widespread that I feel like it’s part of my life now.

Hypergrowth is exciting, but it is not sustainable.

WeWork’s hyper-growth was one to drop jaws, but its profitability (or lack thereof) would do the same for the diametrical reason.


5. They fail to see their own errors

Photo by fauxels from Pexels

I call this “death by blindspot”.

If you cannot see why you failed and learn from it, chances are it will be a very long, tedious, arduous road to achieve any significant results, let alone success.

Let’s refer back to Company X.

The pitch presentation was terrible. The presenter rambled on about their product and the technology.

And if that wasn’t bad enough, he misquoted numbers from the financial projections and the amount they wanted to raise.

The founder and his team also demonstrated a serious lack of organization, as both internal and external communication were shoddy and their virtual presence was terribly prepared — shaky video dial-in from cell phones, excessive background noise, the passing of phones to other unknown team members in the middle of the discussion.

Perhaps it was nerves or a lack of preparation.

But for a company that has engaged an advisory group for strategic consulting and to facilitate its capital raise, this was no excuse.

Rather than acknowledging the real issues here, the advisory group was instead pleased to inform us that they had ‘coached’ this company in many aspects, including the pitch.

Neither the advisory group nor the company seemed at all aware that the pitch was badly presented and that there were significant internal gaps that needed to be worked on.

In this case, we could see that while Company X has potential in its innovative solutions, not only did it have significant internal issues, it also fell into the wrong hands of advisory.

Unless there is a clear awareness of these issues that needed to be addressed and improved on, this will undoubtedly further impede their growth.


Capital raise can certainly be a complex process.

It pays to work with and be guided by the right people with the relevant high-level connections and expertise who can save you a lot of hassle and time in the long run.

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