Typically, most entrepreneurs set out on their own or rope in a few friends and become co-founders of the new venture. Even though it may seem far too early, you need to start planning for how additional funds will be raised after the initial round provided by own savings and loans from family and friends. After the venture has gained its initial traction and there is enough evidence that the future is bright, you need to plan how to access funds that will take it to the next level. Take a look at some red flags, when you are planning to raise the money, which indicates possibly you will not be successful:

Difficulty in Arranging Investor Meetings

The very first warning that there could be something seriously wrong is when you find it difficult to attract the interest of potential investors. Even if you manage to pull some strings and get them to meet across the table, you find them not asking too many questions. The lack of interest can happen due to multiple reasons like lack of credibility of the team, poor references by back channels, lack of networking with important investors, poor reputation or even as simple as the wrong type of investors being targeted. Another reason why the meetings may not be happening is the poor quality of the marketing materials and the executive summary of the business idea and venture. These materials may be wrongly structured, too sketchy or, as is very common, too detailed to arouse the interest of investors.

Follow-Up Meetings Never Happen

Even though you managed to make a pitch to the investors, if you find that there are no subsequent meetings, it is an indicator that they were not enthused either by the business concept or they found fault with the credibility or reputation of the founders or simply, were the wrong type of investors. Before going in for funding, your primary aim should be to generate a refined list of investors that are likely to be interested in ventures like yours and then try and use your networking skills to be able to get an opportunity to make a presentation. Sometimes, the lack of interest after you have made the pitch could be due to the poor quality of the presentation itself. A pitch is more likely to be successful when it contains time frames that are important to the investor such as business, sales, and revenue milestones that will enable them to make a more objective evaluation of the profit potential upon exit.

You Have Not Met Key Business Milestones

Investors are always more interested in businesses that show steady progress and consistently meet the milestones. If you have never bothered to set milestones or have missed most of them, it is a poor reflection of your capability and commitment, and a surefire red flag for investors. For your fund-raising to be more effective, it pays to start networking with potential investors long before you are actually in the market for the required funds. It also helps a lot if you have established a track record of meeting production, sales, distribution, etc. milestones. Getting debt settlement feedback can be very useful in judging whether potential investors are likely to be interested in your venture.

Lack of Potential of the Target Market

There are plenty of situations when entrepreneurs are so caught up with the brilliance of their ideas that they might not have studied the market potential very closely with respect to the target customers and the competitive scenario. Since most investors will not tell that your idea sucks with respect to the market potential directly to your face, you will need to be sensitive to the questions prospective investors ask regarding this aspect. In case, you discover that your research regarding the analysis of the market potential has not been meticulous before you attempted to raise funds, you should immediately abandon the funding effort, and instead, make sure that a detailed situational analysis is conducted. This will ensure that you can be certain that there is a large and fast-growing market that you can take advantage of; not only do you benefit the most but it is also an investor prerequisite. If others have made an entry into the same market, you should try and figure out how to reconfigure your products or services to gain a competitive edge. Playing the price warrior is generally not a tactic that most investors favor unless it is a part of a well-thought-out strategy for grabbing market share and ramping up sales to a critical mass.

The Target Audience Is Not Responding as Per Your Expectations

For your funding to take place, you will need to demonstrate that there is substantial interest by customers in the product or service. For small ventures, this compelling customer interest can be shown by customers willing to evaluate the offer and provide testimonials or even better, enough details for the construction of a case study that can add to the credibility and impress investors. Since investors conducting due diligence may want to interact with existing customers or even important prospective customers, you need to keep such exercises in mind before engaging in a fund-raising exercise.


If you are trying to raise funds in a hurry simply because your enterprise has no more cash to carry on, it only sends wrong signals to the investors. Even if the business model is good, investors are reluctant to associate with people who obviously are poor money managers. If they can figure out that you are really desperate, you can be sure that you will land up with an investor who would only be too glad to nudge you out and make a killing with a management it puts in your place. If your venture is being unable to attract the right talent or is experiencing a heavy attrition, it will also send out signals to the investor that all is not right with the business. It thus becomes very important that you set right all the flaws that investors are sensitive to before setting out to raise funds.