Why Venture Capitalists Reject Good Start-ups

Having a good team, good product and customers is not a guarantee that venture capitalists will invest in your start-up. VCs have been saying “no” to numerous good start-ups and founders. There are several reasons why VCs may decline to work with good start-ups.
Venture capital often invests according to fund strategy, meaning VCs invest in specific stages of companies. Idea stage companies that try to raise funds from an early stage fund are told to come back after gaining more traction. Early stage companies trying to raise capital from growth equity funds may also hear the same rejection.
VC can reject a start-up on the grounds of a “competing portfolio company.” Venture capital involves picking of winners. Once investors choose to invest in a start-up in a particular space, it is difficult for them to bring in another similar start-up. This is because the start-ups might end competing with each other.
Lastly, venture capitalist can reject your start-up because you are too late to the game. Trends come and go, and investment opportunities are not exceptions. As investment in social media continues to wind down, another investment may emerge as the next hot thing.
Why startups get rejected by venture capitalists (and why Warren Buffett is involved)


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