Why Investors Say No: Recap and Video Link

5 years!

Why do investors say no? And say no so often? The Avio team has interviewed over 100 VCs and angels and organized their responses into a presentation, along with suggestions you can use to improve your odds.

The presentation was given as a webinar, which you can watch here

An AI-generated (and human-edited) summary of the presentation is below if you want the cliff notes.

Why investors say no:

• Lack of Market Potential: Frank discussed the importance of market potential for venture capital investors, emphasizing that a startup must meet certain market size and growth hurdles to attract investment. He provided an example of a clinically novel device with a small market that struggled to excite venture capital investors.

  • Market Size Importance: Frank emphasized that venture capital investors require startups to meet certain market size and growth hurdles to attract investment.

  • Example Provided: Frank provided an example of a clinically novel device with a small market that struggled to excite venture capital investors due to its limited market potential.

• Poorly Defined Customer: Frank highlighted the issue of poorly defined customers, explaining that companies must clearly articulate who will use their product, why they will use it, and who will buy it. He stressed the importance of understanding multiple stakeholders involved in purchasing decisions.

  • Customer Definition: Frank explained that companies must clearly articulate who will use their product, why they will use it, and who will buy it.

  • Stakeholder Understanding: Frank stressed the importance of understanding multiple stakeholders involved in purchasing decisions, including primary care, surgeons, hospital administrators, and value analysis committees.

• Insufficient Team Experience: Frank emphasized the importance of team experience, stating that investors need to believe in the team’s ability to execute and generate superior returns. He suggested surrounding oneself with resources and people that elevate credibility, such as a strong board of directors and advisors.

  • Team Credibility: Frank emphasized that investors need to believe in the team’s ability to execute and generate superior returns.

  • Elevating Credibility: Frank suggested surrounding oneself with resources and people that elevate credibility, such as a strong board of directors and advisors.

• Unclear Business Model: Frank discussed the importance of having a clear business model, using examples from the digital health world to illustrate the challenges of validating market assumptions and demonstrating profitability. He stressed the need for companies to validate their market and business model early on.

  • Business Model Clarity: Frank discussed the importance of having a clear business model and validating market assumptions early on.

  • Digital Health Example: Frank used examples from the digital health world, such as remote patient monitoring, to illustrate the challenges of validating market assumptions and demonstrating profitability.

• Intellectual Property: Frank explained the importance of intellectual property (IP) protection, advising companies to build strong relationships with IP attorneys early on to ensure appropriate protection without over-investing or under-investing.

  • IP Protection: Frank explained the importance of intellectual property (IP) protection for startups.

  • Early Relationships: Frank advised companies to build strong relationships with IP attorneys early on to ensure appropriate protection without over-investing or under-investing.

• High Regulatory Hurdles: Frank addressed the issue of high regulatory hurdles, clarifying that investors are not afraid of complex regulations but rather teams that lack understanding of the regulatory path and its impact on market adoption.

  • Regulatory Understanding: Frank clarified that investors are not afraid of complex regulations but rather teams that lack understanding of the regulatory path and its impact on market adoption.

  • Market Adoption Focus: Frank emphasized the importance of focusing on market adoption rather than just market authorization.

• Poor Presentation: Frank highlighted the impact of poor presentation on investor confidence, advising companies to make a positive first impression, tell a compelling story, and pay attention to details such as proofreading and presentation cadence.

  • First Impression: Frank advised companies to make a positive first impression to build investor confidence.

  • Compelling Story: Frank emphasized the importance of telling a compelling story that resonates with the audience.

  • Attention to Details: Frank highlighted the need to pay attention to details such as proofreading and presentation cadence to avoid undermining the quality of the presentation.

• Confidence in Execution: Frank summarized the importance of investor confidence in a company’s ability to execute, suggesting strategies such as building a great team, having a clear return plan, maintaining a professional website, and proactively addressing weaknesses.

  • Investor Confidence: Frank summarized the importance of investor confidence in a company’s ability to execute.

  • Strategies Suggested: Frank suggested strategies such as building a great team, having a clear return plan, maintaining a professional website, and proactively addressing weaknesses.

• Pro Forma and Valuation: Frank discussed the importance of pro forma financial statements and realistic valuations, advising companies to think through costs and revenue generation to demonstrate competency and credibility.

  • Pro Forma Importance: Frank discussed the importance of pro forma financial statements in demonstrating competency and credibility.

  • Realistic Valuations: Frank advised companies to have realistic valuations and think through costs and revenue generation.

• Competitive Landscape: Frank emphasized the need for companies to understand their competitive landscape, differentiate their product, and validate their market position through research and customer interviews.

  • Competitive Understanding: Frank emphasized the need for companies to understand their competitive landscape and differentiate their product.

  • Market Validation: Frank advised companies to validate their market position through research and customer interviews.

• Exit Strategy: Frank stressed the importance of having a clear exit strategy, advising companies to analyze potential acquirers, understand market valuations, and align their return profile with investor expectations.

  • Exit Strategy Importance: Frank stressed the importance of having a clear exit strategy for startups.

  • Analyzing Acquirers: Frank advised companies to analyze potential acquirers and understand market valuations.

  • Return Profile: Frank emphasized the need to align the return profile with investor expectations.

Startups are hard. We get it. Avio was born in the startup trenches. Founded by a medtech innovator, for medtech innovators, we understand the unique challenges you face. Let us leverage our firsthand experience to accelerate your journey to market.

It will never be easy or stressless, but it can be easier and less stressful.

frank@aviomedtech.com