Twelve Reasons You Didn’t Get Funding for Your Startup

I am approached quite often by a range of entrepreneurs—from first timers to startup vets– who are looking for funding for their companies. As both a veteran entrepreneur who has raised about $73M in funding, and now in my commercialization/startup role at the University of Pittsburgh’s Innovation Institute, one of the major public research universities in the U.S., it never surprises me how the search for funding is a constant concern for every entrepreneur. I think some of the folks who approach me are looking for sympathy as much as assistance.

I have been in those shoes many, many times. Raising funds is not fun. That’s why we see more and more startups looking at non-traditional sources such as crowdsourcing like Indiegogo or Kickstarter or plain old fashion ‘friends, families and fools’ or god forbid, revenue, are becoming increasingly popular. matter how you approach getting your funding, what type of funding you get or, how much funding you receive , there is also another problem: not getting funding. Now before we go there, let me make a comment about an old saw: ‘there’s plenty of money and if you have a good idea /deal/business you will get funded’. That’s simply a lie. I wish people would stop saying it. That tome is usually told by professional investors or those that want to ingratiate themselves to them (those trying to raise or that just received money!). There is not enough money in every region for even deserving startups; it doesn’t always go to the best ideas/startups; and yes, good ideas and businesses do die because of not raising money. They call that ‘running out of runway’.

That being said there is another side to raising money. And that is you and your business.

In many cases you and your team didn’t get funded for good reasons. And while it’s difficult to hear, you should learn from every interaction and build off of each rejection. Yes it’s hard. Yes it’s frustrating. Yes its time consuming. Yes you would rather being building your product or running your company, etc. But the most important thing the process will do is allow you to improve.

So what are the top reasons you didn’t get funding? ( I have collected some here and added my own—feel free to add some more)

  1. No pain, no gain. You wont raise money if you’re not solving a problem — a significant one — with what you are bringing to the market. You are simply solving something interesting. Or maybe it’s just a technology that’s cool or fascinating, but it’s in search of a problem. I call these ‘research projects.’ Show the pain. And show why it’s a large, unsolved problem.
  2. It’s a feature not a platform. You are solving a small part of a larger problem or what you are bringing to market is really an add-on to a significant existing system where you could be easily squashed. Now these plays can work out; people build beachheads in other eco systems and then expand to disrupt a market. But you have to show why you are not a feature. Which brings us to
  3. Not first or unique/no barriers to entry. Let’s break this down to two issues: raising money and market reality. In a recent study, patents were found to be highly relevant to obtaining venture-backed funding at biotechnology and IT hardware-based startup companies. It may also be surprising that this study also demonstrated that patent protection was also found to be relevant to software-based startups gaining venture-backing. So patents as a barrier to entry are good for raising money. Whether these translate to protecting you on the market is a different question. If you don’t have protectable IP, you need something else: something unique that is hard to copy, or being first in the market where you can gain a notable, substantial lead, etc.

To read reasons 4-12, please click here: