Ever since its founding and recognition as a legitimate nation, beginning in 1776, America has long been seen as ‘the land of opportunity. This is especially true for trending startup businesses. After all, it was the entrepreneurial spirit combined with the hard work of the Pilgrims, and later the American colonists that build America. America
Ever since its founding and recognition as a legitimate nation, beginning in 1776, America has long been seen as ‘the land of opportunity. This is especially true for trending startup businesses. After all, it was the entrepreneurial spirit combined with the hard work of the Pilgrims, and later the American colonists that build America. America has been seen as a wonderful playground for trending startup business in America because America’s laws and culture encourage entrepreneurship, and because capital has traditionally been easy to come by. However, recent government legislation combined with the increasingly hostile business climate in America, and the drying up of venture capital has made many people wary of investing in trending business in America. This article discusses twelve reasons why you should not invest in the best businesses in America.
1. Never invest in a business with no customer base or sales base: let’s face it if your business doesn’t have customers, it doesn’t have sales, and it is more of something that you do in your spare time as a hobby than a real business. It may sound hard to believe but a lot of businesses exist which have neither a customer base or a sales base. They simply gobble up precious investor capital on good looking offices and nice vacations and perks for the owners and board of directors. Investors have been burned by these bogus businesses in the past and will be wary to invest in your trending startup business especially if you can’t prove that it can generate a viable and sustainable customer base and revenue stream in the five-year projections of your business plan.
2. Run away if the owner of the trending startup business asks the investor to become his or her partner? At the end of the day, an investor’s basic job is to raise money to invest in businesses, to evaluate businesses for their credit and investor worthiness, and to make money. Investors are not trained to help you run your trending startup business, no matter how good the product/services and ideas are. Besides, investors are evaluators and there is a big difference between knowing how to evaluate a company for investor worthiness and long-term viability, and actually knowing how to run a business at the fundamental level. If you ask the investor to help you run and manage your business, expect him or her to take his or funds elsewhere.
3. The trending startup business owner doesn’t have his or her financial act together: What this means is that the financial statements are such a mess that even a financial sleuth couldn’t decipher them, or they are nonexistent. After all, if you don’t have a clue as to how to manage and make money, why would you be successful? Expect investors to pass you over if your business plan lacks solid and logical financial statements.
4. You intend to keep your trending startup business local: This is an immediate red flag for investors not to invest in your company because it will probably fail in the long-run. Any business needs to have people who will pay for its products and services repeatedly in the long-run. If your business stays local, you miss out on a lot of opportunities which exists in global markets. Let’s face it, competition in your industry and field is intense and it will be very difficult for you to find the paying customers who will generate the revenue you need to pay for your escalating business expenses and still make a profit in a short period of time.
5. You are a newbie at launching a trending startup business: Let’s face it, business education and the theories you learn from business textbooks is great, but you don’t really learn about business until you go out and do it for a long period of time. If you don’t have experience, your trending startup business is bound to fail, and no investor wants to invest in a company that he or she knows will fail in the long-run! Why would he or she? That would mean that the investor would be throwing his or her hard earned money down a pit. No investor will be stupid enough to do that! Also, businesses change as the environment which they are in evolve. It takes the experience to know how to build and fine tune a business model to excel in its evolving business environment.
6. No transparency or honesty: Let’s face it if you aren’t going to be up front and honest about your business transactions, operations, and accounts, chances are you are doing shady (and probably) illegal things that will lead to the eventual demise of your business. No investor wants to invest in a business whose dealings are immoral, unethical, and which is doomed to failure!
7. No proprietary or defensible products or assets: the Internet has made every industry super competitive because anyone with the right idea, business plan, and enough capital can easily start a business in your industry and start selling on your turf. If you don’t have a special product or service that would be hard, if not impossible, for your competitor to replicate, there is no guarantee your business will be around tomorrow. Because investors want to recoup their initial investment with interest, they will likely see your business as a financial risk and walk away.
8. There are no proven marketing channels that can grow with time: as a business owner, you need sales and customers to stay in business, and you need marketing channels which you can prove to an investor actually work. If this is not the case, investors will stay away, fearing that you will spend all of their money experimenting with different ways and channels over which to market and earn no profits which will allow them to quickly recoup their initial investment with interest.
9. No knowledge of Key Performance Indicators (KPI): if you know which metrics are necessary for your business to succeed and how to measure and reach those, your business will probably be a success. Investors are looking to invest in businesses that look likely to succeed because they make money along with the business owner!
10. The business has a short-runaway: investors want your business to have at least 12 months of a post-close runaway or cash reserves which will allow you to concentrate solely on business operations. They don’t like it if you and your team spend a lot of its and your time on raising capital because this takes you away from your most important task: running your business on a full-time basis to ensure that your company attracts the customer and sales base it needs to succeed.
11. TAM is too small: if you want your business to succeed in the long run, you will need a lot of customers and this is especially true if your trending startup business is very small and in a very competitive market. The only way your business is going to get a lot of customers is if your actual market is very big. If you are in industry where the actual market (TAM) is too small for you to have a large enough potential customer base to sell to, it doesn’t matter how innovative or great your business idea is, or how great your business model and/or plan are, your business will be eventually doomed to failure. Investors know and recognize this and they tend to walk away in these instances.
12. No pre-revenue or pre-ship: what this means is that your trending startup business has not already made sales, and/or does not already have a strong and growing customer base. This is the stark truth, your company may have a great valuation in terms of stock and market value, but this means nothing if your sales team can’t sell because the investment risk of your trending startup business will be too high for most investors to stomach. At the end of the day, your business will fail if you can’t make any sales. This is the reason why investors look for companies which have already made sales because they are the most likely to succeed in the long-run.
The business landscape and environment are changing in America. Trending startup businesses are increasingly not being started by educated people with business savvy. The increasingly high business taxes, mandatory health insurance requirements, and decreasing lack of access to easy capital have made those who are most likely to succeed as entrepreneurs stay away and do something else. The 12 above mentioned factors are some of the reasons why you shouldn’t invest in the best businesses in America if you are an investor.,