Why startups don't get investments: 7 typical mistakes

Meirzhan Esikhanov, city — Almaty, Executive Director at Activat VC

Having reviewed several thousand pitch decks and spoken with hundreds of founders, I have compiled the top 7 mistakes that most founders make in our market. Most of these mistakes are interconnected, and having several of them in one startup significantly reduces its investment attractiveness.

1. No market research: The founder does not understand whether there is a market for their startup or what its regional and global size is. Before creating a startup and especially before approaching investors, the founder must answer several questions: do similar solutions exist in the market? Were there such solutions before? What happened to them?

2. No customer development (custdev): The founder does not understand whether anyone besides themselves needs this startup. It is necessary to talk and receive feedback from potential customers. The more such conversations, the higher the likelihood that the founder will find the product that truly addresses the customer's pain points.

3. Unjustified investment in development: Founders invest their personal funds, pledge their property, and hire a development team before receiving any feedback from potential customers. Often, many create a product while ignoring the first two points from today's list of mistakes. At the same time, many mistakenly believe that by investing a significant amount in development, they can increase their initial valuation.

4. Focus on the perfect product: Founders constantly improve their product without having customers and feedback from them, do not release it to the market, and skip the MVP stage. Why is this dangerous? The competitor who is faster will overtake on the turn and gather all the cream from the market.

It is important to understand that the requirements for startups and established companies often differ, and no one will demand product quality from a young founder as if it were Microsoft or Apple, although even they sometimes "mess up."

5. Nothing but an idea: There are a number of founders who believe that they can get investments simply by stating their idea to an investor. This is not the case at all now, and before going to an investor, one needs to make basic calculations for the market, financial model, and unit economics of the product. This will show that you are already moving in the right direction, have done some work, and are ready for more.

It is important not to forget that an idea without implementation is worth nothing.

6. Working alone: If the founder was unable to gather like-minded people, i.e., effectively "sell" someone their product idea, how can they sell the product to a customer and an investor? Moreover, developing a startup is a resource-intensive activity that will drain the founder of all moral and physical strength, and working alone in such a multitasking mode for a long time will not be possible.

Yes, the attitude towards solo founders is changing in a more positive direction now, but nevertheless, there should be people in the team, even without equity, who will help relieve the founder of some routine operational tasks.

7. Poor pitching: Founders underestimate the importance of a proper presentation. Timing, the ability to structure the presentation from problem to solution, knowledge of numbers, product, and customer information, the ability to answer questions and withstand pressure — all of this shows how the founder will interact with customers, partners, team, and investors.

If an investor notices that the founder is "lost" in information about their own business, should they trust their money to such a person?

In conclusion, I would like to add that often the founder has a second chance: no investor writes off a project if they make one or two mistakes from the list above.

At Activat VC, we always give constructive feedback to founders, and each of them can return to us after correcting the shortcomings.