As a follow up to Common Investor Questions at The Atlanta Tech Village, one of the questions I received was why do investors have a hard time finding investment opportunities. There are a number of excellent startups with customers, management teams, and decent growth. Only, they can’t raise any money. What gives?
Just because the startup is making progress, without fast growth and a big market, most investors will pass. Fast growth is an indicator of product/market fit and latent demand for the product. Big markets present an opportunity to build a major business and generate out-sized returns. Investors often require both be present.
Most startups aren’t growing fast (> 100% year-over-year), even though they are a growth-oriented company (see the definition of a startup). They want to grow fast but haven’t achieved their goal. Most markets aren’t big enough to generate venture-like returns. Entrepreneurs pitch that their product serves a big market, but most of the time it’s a much smaller slice of the market.
Investors want fast growth and a big market. Startups that don’t have both rarely raise money.
What else? What are some more thoughts on fast growth and big markets as requirements to raise money?
David Cummings on Startups 
I completely agree. I think the potential for growth factors in as well. I’ve witnessed VCs bet on companies with no growth based on the size of the market and the plan of execution alone. Rapid growth helps, though!
I agree with David’s and Rj’s thoughts and would add that often owners of high growth companies overlook developing the infrastructure to support continued growth. Up one year and down the next due to increase customer complaints, overwhelmed sales teams, longer working hours which leads to lower morale. A second common problem is a lack of focus on strategic planning. Red flags for investors.