Why do I get rejected by venture capitals?

Think of yourself as the investor, why would you say yes or no to a proposed investment.

First you have to understand VCs are fund mangers who manage a fund. They need to return the fund in 8–10 years period and it has to make a profit for their investors! There are only few ways for them to get their return back:

- Listing the company (they sell their shares in IPO)

- Exiting or M&A (they sell their shares when the company is acquired with valuation growth)

- Dividen (your company is EXTREMELY profitable)

They usually have few of these questions in mind when they evaluate a startup/business:

• What is the catchy story (elevator pitch) about your company ? VC receives tonnes of pitches everyday, what makes you stand out that they can pitch your story easily to their partners/investors.
• How big is the market? They need to know what is the potential of the business, is there room for growth if they invest? Is the problem big enough and worth to be solved?
• Is the MVP ready? They typically don’t fund ideas unless you have exited a startup before. If you are managing someone else’s money, would you fund an idea coming from a stranger?
• Any traction (userbase or revenue)? It is a proof that your product actually attracting users/money.
• Do you have a fit team? Have your team put your skin in the game? Is the team the right team to execute it with the right experience, backing & attitude?
• Proven revenue model? How is your startup generating revenue? This is to measure with X amount of fund invested, what is the Y amount of revenue can be generated and hence how can this X & Y contribute to profit growth or valuation growth?
• Financial model & go to market strategy ready? How can you predict the growth of the company with the current traction you have? They need to see a healthy bank account balance before you run out of money to raise future round. Do the figures make sense in terms of financial? How can their money help you growth by breaking down every single detail in a financial model.
• Business model ready? If you are building revenue streams that can’t cover the operational expenses currently, what is the business model behind to make the model profitable or high growth in valuation?
• Name your price. It is still a supply demand matter. Does your valuation & the shares you are giving out fit what they can accept. You just can’t sell a Toyota Prius with a Ferrari price tag on it.

VCs generally invest in high growth companies that can return multiples of over 20X - 30X on their investment.

Almost all the time, VCs generally get their returns from selling the stake they own in your company.

In other words, if you're not high growth and do not ultimately provide an avenue for VCs to liquidate their stake in your company at 20x-30x, they won't invest in you.

Another main reason why they don't invest in you is because it doesn't fit their mandate.

As VCs manage other investors' money, they are restricted from investing in certain companies, such as companies that are:

• Too early - They believe there is an opportunity but your company is at a stage they don't invest in (example: you're at the seed stage but they invest at Series A and above)
  
• Too late - Your company has grown far larger than the stage they invest in (they wont be able to get the valuation they want) OR the market is saturated (ie: ride hailing and e-wallets).
  
• Invalid Sector - Your business operates in a sector they do not invest in (ie: social media companies going to fintech VCs)
• Overvalued - Some founders are pitching a company valuation that is too high.
• Poor team - Bad execution, egoistical founders, etc.

and lots more...

There are many more reasons, bu these are the high order bits.