Houston Voices

3 reasons venture capitalists say no, according to University of Houston research

Most venture capital rejection is because of one or more of these three reasons. Miguel Tovar/University of Houston

One of the most common questions that pops up in startup circles is, "Why did they turn me down?" There are myriad reasons why a venture capitalist might turn down pitches and decline funding. Here, I'll present the three most common.

They don't understand your business

Einstein once said, "If you cannot explain it to a six-year old, you don't understand it yourself."

If you spend an entire presentation showing well-researched facts and figures, talking about how groundbreaking your idea is, and presenting detailed charts and graphs, but your audience still has no idea what you do, you're in trouble.

Moreover, avoid overusing jargon and esoteric terms in your pitch. Speak simply.

If you cannot explain in simple terms what your startup does and why it's marketable, potential investors have no reason to believe you will know what you're doing with their money. To sum up, they'll think you don't understand your own business.

They don't think you've done the legwork

Some venture capitalists invest in early stage startups, so it's totally normal for them to sit through pitches where a product has not even been built yet. Consequently, the problem comes when it becomes evident the startup founder has failed to do any legwork. As a result, investors are likely to feel insecure about giving their money to someone who couldn't even do simple research.

Sure, the product hasn't been built, but that is not an excuse to sit back on cruise control. In other words, don't take your foot off the gas. Move forward constantly and don't stop learning more about your industry.

What have you done for customer development? Customer discovery? How many potential customers have you talked to? How much would they pay for your product or service? Have you studied the competitive dynamics of the market for which you will enter? Who is your competition and what are their strengths and weaknesses? You get the picture.

Certainly, one big misstep among startup founders is that they tend to believe work should not be done until they attain funding. Wrong. During your struggle to attain money, you should be busy learning everything about your industry, market, and customers. That way, once you finally get that meeting with an investor, they will feel much more confident that you will use their money intelligently.

They don't see that you have a strategy

It's an unfortunate commonality that a startup founder will put together a great pitch, get deep into it in front of a venture capitalist, and then unravel the entire presentation by exposing themselves as not having a plan of attack for the market. To clarify, it is a huge waste of your time to undo all your hard work by showing you don't have a strategy. Remember, investors are looking for reasons to pass on you.

When asked about their strategy for reaching the market, a common refrain is, "we will provide this awesome service (or make this awesome product) and the customers will roll right in." Or even "we will partner with this corporate giant who will sell our product because it's that amazing."

Above all, you must show your potential investor that you have the wherewithal to create, polish, and scale a reliable process that reaches your customer base.

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This article originally appeared on the University of Houston's The Big Idea.

Rene Cantu is the writer and editor at UH Division of Research.

The University of Houston College of Medicine can now enroll its inaugural class. Photo courtesy of University of Houston

The University of Houston has received the green light to move forward with its recruiting and enrolling its first class of 30 medical students for the first new medical school in Houston in over 50 years.

The University of Houston College of Medicine has received its preliminary accreditation from the Liaison Committee on Medical Education, the authority on medical education in the United States and Canada that is sponsored by the American Medical Association and the American Association of Medical Colleges.

This accreditation means the school can begin enrolling its inaugural class of 30 students and begin classes on July 20. Each of these new students will receive a $100,000 four-year scholarship thanks to an anonymous donor.

"Today is a historic day for the University of Houston, city of Houston, and the state of Texas because we are building this dream together," says Renu Khator, president and chancellor of the university, in a news release. "By training the next generation of compassionate physicians who understand how to provide quality health care at a reasonable cost, we are expanding our capabilities to serve the people and neighborhoods too often left behind."

Khator announced her plans to create the new school in 2014, with the goal being to address the shortage of 4,800-plus primary care physicians in Texas, according to the release.

For now, the school will operate out of UH's Health 2 Building, but the university plans to break ground this summer a new $80 million College of Medicine building. Completion is expected in 2022.

The school will focus its curriculum on primary care, behavioral and mental health, and preventive care, per the release, and create a household-centered care program that involves connecting a student with a family in an underserved community. According to the release, UH med students will be required to spend four weeks in a clinic in a rural part of the state.

"At full staffing we will have 65 full-time faculty teaching on campus, but there will be also be a large number of community-based faculty teaching in the outpatient and inpatient clinical settings," says Dr. Stephen Spann, founding dean of the medical school, in the release. "It is imperative that we place our medical students and faculty directly in the communities with the most need."

The school will still need fill accreditation from LCME, and, according to the release, this level of approval is usually granted within the fourth year of operation as long as the school meets the standards set by the organization.

"We are extremely grateful to receive LCME accreditation, but now the real work begins because we want to be accountable for improving the overall health and health care of the region," Spann says in the release.