Why less than 1% of startups are successful at raising capital

If you’ve tried raising capital for your product before, there’s a good chance you’ve heard one (or more) of these statements from investors:

  • I don’t fully understand your business model.
  • You don’t have enough evidence of traction.
  • Where’s your five-year forecast?
  • Your go-to-market strategy doesn’t seem right.
  • Your market size is too small.
  • Come back when you’ve built a product.
  • Come back when you’re growing at 200% month on month.

These are general examples of the types of feedback many founders get from investors.

IF they get that first meeting at all.

“Raise capital” – it’s easy to say, not very easy to do.

According to the Launch Scale report by Pear Venture Capital, less than 1% of startups are successful at raising capital.

This appears to be a chicken-and-egg situation.

You have to raise capital to invest in what you need to make progress (like building a product).

But so many investors want you to have built a product before they’ll invest the capital.

And herein lies the problem.

Many startup founders believe that these three elements are what lead to startup success:

  1. Getting a Minimum Viable Product out as soon as possible
  2. Getting as many users as possible
  3. Raising capital to scale

But we’re in a new climate now, where investors are looking in a much more risk-averse way at their deal flow.

You might wonder, what’s a less risky approach to building a startup?

Here’s what it looks like:

  1. Use small experiments
  2. Use Lean build-measure-learn principles to validate these experiments
  3. Get third-party validation from customers (so you know what’s actually required to get to product-market-fit) and do this as quickly as possible.

So how do you do that?

Unfortunately, there’s no established startup playbook.

In fact, there are so many resources out there with conflicting information on how to go about building a startup that researching and understanding what is going to work in your individual situation is almost impossible.

You could talk to an advisor or attend a hackathon and build your product on the weekend.

But the lived experience of the people you meet in these situations is unlikely to be what you need to make progress.

If you’re lucky enough to get into Y Combinator or get funded by Andreessen Horowitz, you’re almost certainly going to meet true startup experts.

Or if you’re lucky enough to attract the attention of a tier-one VC or angel investor, again – you’re almost certainly likely to get expert help based on significant lived experience.

But this kind of luck is rare.

And if that’s not you, your lack of access to the right advice puts you at great risk of choosing the wrong turn and making the wrong decision and the wrong time – which is what leads to that infamously large startup failure rate we all know about.

Ask yourself:

  1. Are you aware of all the possible unknowns and do you have a reliable way of assessing your blind spots?
  2. Do you have a reliable way to know that you’re working on exactly the right things at the right times?
  3. Do you have the right people on your team for the stage that you’re at? Hint: early-stage startups normally succeed with generalists who can work across the business and are keen to learn new skills, rather than specialists who are set in the roles they were hired for.
  4. Do you have the lowest possible burn rate?

If you’ve got assurance over your answers to these questions, we’d love to meet you.

If you don’t, we’d love to work with you.

LeapSheep was built specifically to solve this problem.

We’re codifying startup expertise into a system that can be personalised to the needs, goals, and circumstances of each founder and their team.

If you’re a founder and you’d like to share more about your situation with us, click here and fill out this short questionnaire to get started.

 

Whenever you’re ready, here’s how we can help you.

If you’ve got a startup idea, or you’ve already embarked on your journey – you might be facing one or both of these situations.

  1. You’re struggling while going it alone. Worse, you’re wading in the muddy waters of some not-so-great advice.
  2. Perhaps you’re trying to raise capital for your startup and you’re hitting a dead end. Raising capital is a notoriously difficult thing to do. Globally, only 0.74% of startups manage to raise capital at Seed stage. Despite this, 16% of startups we’ve worked with were able to raise capital at Seed stage.

If you’re ready to step up and get the help you need, our Startup Builder™ program was created especially for you.

The Startup Builder™ process is specifically designed to take you all the way from idea to global success – in a way that’s simple, sustainable, and scalable.

If you’re ready to grow your revenue, profit, and social impact faster without wasting time and money on the wrong things at the wrong time, click here to request your Startup Builder™ Strategy Session.

 

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