10 Reasons Why Investors Say NO

Investment Scrabble text

Investors get to see hundreds of pitches every month, but only one or two will get an investment. 

Make the investor believe in your dream. The attitude you’ll have can’t be that I just want to get the money, and here’s the game we are building. It needs to be about something big, something that will require many things to go right, and that there is a journey that you want the investor to be involved in.

#1 Doing beginner mistakes

I often see founders who’ve acquired a spreadsheet file that contains a list of three hundred VCs and their email addresses. These are happy founders. They think the spreadsheet is a goldmine. They’ll start emailing the VCs one at a time. They believe this will give them high odds at landing an investment. At least one from the list will provide me with the investment, right?

There are a few problems here. 

Founders don’t usually do the extra legwork of research the VCs on the list. What stage are they investing in? Are they familiar with gaming? If not, are they comfortable at investing in gaming?

Investors don’t like “cold emails.” They are already getting enough cold outreach from all over the place. The best option would be to get a warm introduction from another founder who knows the investor. The reason it works is the other founder is acting as a gatekeeper, only connecting the investor with people who matter.

Another beginner’s mistake is to ask the investor to sign a non-disclosure agreement (NDA). In short, investors don’t sign NDAs. Asking them to do that will make you look like you don’t know what you’re doing, and there are a few reasons for that.

  • On average, investors see twenty companies a week. That amounts to over 1,000 companies per year. Signing an NDA could potentially prevent them from having a meaningful discussion with any potential investment after yours.
  • There’s a legal mess involved. If each investment proposal comes with an NDA attached, then each NDA must be negotiated. Also, the investor must comply with that web of NDA’s even if the investment proposal gets rejected. Many businesses start from a similar business concept or model. How many pitches are along the lines of “This game will blow up the [fill in the blank] market”? An investor may struggle to demonstrate compliance with NDAs when it receives investment proposals for basically the same business opportunity from separate founders. It’s a legal claim waiting to happen.

Anyways, investors won’t require detailed technical information in the initial meetings. In your pitch decks, remove any sensitive information and don’t go into technical, confidential information during your presentation. As you progress through a series of meetings with a prospective investor, you can hold information that you believe to be sensitive for later talks. Later, you will have built a stronger relationship with the investor, and when you think that any perceived risk of giving out the information has been balanced by the higher likelihood of an investment happening.

#2 Lack of clarity on money to be raised

I remember pitching my first game company in 2007 to investors. I started first by asking for $4,000,000, then went to $2,000,000 in a few months, then to $8,000,000. Finally, a year-and-a-half later, I ended up raising a total of $550,000 from two investors. The reason why I was jumping between the numbers was that the only source of what I should raise from investors was what I had read about online. I was also interpreting the advice of “raise as much as you can” in a way that it’s better to ask for more than you need. I didn’t know what I needed. I just wanted to keep the company alive for another year as we were trying to make our game work.

Now I know the main reason that you raise money.

The money is meant to be used to operate on the next level. Let’s think about company building as a video game. You start on level 1. You make your way through the obstacles and challenges, finally beating the End Boss, and graduating to level 2. To overcome the end boss, and go to the next level in company building, you often need investor money. But you don’t raise money to stay on level 1.

What this means is that you aren’t raising to pay a better salary for yourself. You raise money to make a difference in your efforts. You raise to be able to hire more people to work on more things. You can pay yourself to survive. Not to take expensive vacations.

The investor will ask you for a projection on how you’ll be using your cash in the following six to twelve months. We here at Elite Game Developers have created a tool for projecting Cash Flows. You can get our template from here. https://elitegamedevelopers.com/gaming-startup-cashflow/

#3 Not thinking about the fit

In 2007, I was meeting with investors who didn’t have a clue about how gaming worked. That has changed, and today we have dozens of investors who are globally investing in gaming companies. Nowadays, I urge founders to gravitate towards the investors who have operational experience in gaming. They can be helpful in the high-level strategy for the company, but also in day-to-day activities like hiring and product.

It’s hard to keep gaming investors as a priority in your outreach when you are running out of money, and you need to raise soon. That’s why founders should start to think about the investors that they want and how to get them early on. Don’t focus on the investor’s money. The investors will be happy to hear the reason you’d wish that, especially they to invest.

#4 It’s not the pitch that matters, it’s the conversation after the pitch

Loads of people prepare for investor meetings by perfecting their pitch deck with countless iterations. What founders should be looking forward to is having an exciting conversation with the investor about the idea they have. 

I get it. You just want the investor’s money. But investors can be helpful in more ways than just money. Investors hear hundreds of pitches every year. They see things become big. They see companies that aren’t going nowhere. Investors start to see patterns in company building. They will most likely be able to give feedback on your business idea.

When I say “business idea,” I’m talking about expanding your mind outside of the game you are making, to look at the bigger picture. 

Some of my favorite topics that I like to ask gaming entrepreneurs are:

  • Why do you think now is an excellent time for your idea to exist?
  • What are the ways that this can fail?
  • How will you navigate around these failure situations?
  • What have you achieved so far?
  • How did you fund your efforts so far?
  • Why are you raising now?

#5 Business basics

You might think that it’s all about making a game. You might be treating the whole “business” thing as a great mystery. As an entrepreneur who is building a company and raising money from investors, you need to understand the basics of the business you are in. 

Here are some aspects that you need to know about your business: What is your customer like, who is the competition and what prevents them from taking over your business. Know your numbers. What are you going after in revenues? How much will the customer acquisition cost look like in your industry?

Investors like to hear a big vision. The reason you are raising money is to build a big company, no to fund a game. Try to find ways to talk about the game you are making as being the first step in creating a big business.

#6 Only pitching an idea, not show progress

I wrote extensively about this topic in the article 7 Ways A Gaming Startup Can Show Traction https://elitegamedevelopers.com/7-ways-a-gaming-startup-can-show-traction/ 

To summarize the article, you want to show clear progress to the investor before you can expect them to fund your company. In the article, I talk about having critical team members join, a prototype becoming ready for testing, or that there are metrics already available from a test. 

To be sure that your actions qualify as progress, it’s essential to focus on real players, off the street, interacting with your game. Giving feedback or providing metrics. These kinds of findings will go a long way to impress the investor.

#7 Technical skills, versus product and market understanding

I meet a lot of people who are looking to found their first game company. Often these people have expertise in building games, and they can talk about free-to-play metrics and monetization.

But the problems start when founders are focused on these technical skills. They see a game as a system of loops and virtual economy taps and sinks. They lose sight of really understanding what a great customer experience looks like in gaming. 

You need to understand a wide range of topics from player psychology, user experience, and how to create challenging moments for players. Investors will want to hear that you can go deeper into understanding your end-user.

#8 Having focus

Trying to do too many things at the same time can be difficult. Focus helps. What I often talk about is short-term clarity and long-term thinking big.

Short-term clarity is about

  • What are the top 3 things that need to happen in the next six months
  • To show real clarity is to state what you’re not going to do

Long-term thinking big is about

  • Having a vision and a mission for the company
  • Building a leadership team for the long term. What kind of “multiple hats” can the team members wear for now? What type of role will they take as the company grows?
  • Masterfully managing inputs and outputs. When you focus on the inputs, the output takes care of itself.

Having a leadership team might sound strange for the person who just left a gaming company to start their own thing. It reminds them of big companies, where things don’t work well. “Why should we also have a leadership team and hierarchy?” they might think. Those things don’t work when there is a bad company culture, and it starts with the CEO who needs to uphold a healthy and robust culture. 

You can do better on the cultural side, but you need to realize that a leadership team isn’t to blame. It’s letting down and forgetting to uphold a strong culture that matters.

#9 Unique insights on product and distribution

Both are needed. We already covered product, which is more than just technical skills, but more on the psychological level of understanding what the customer experience should look like. 

Distribution, I think, is more important than ever in gaming. Long gone are the days when publishers would take care of the distribution. Now it’s all in the hands of the developers, and they need to know what are the current dynamics and how the market will change in the coming months and years.

#10 Not being a storyteller

Don’t be humble and unexcited. You should sell your story to the investor. Tell a compelling story. Investors bet on big dreams. You want to create a situation where the investor is having the dream of the story you just told them.

Avoid being arrogant. Make sure that you have a story where there are a lot of winners, and you can take a slice of an ever-growing market.

Example: Amazon didn’t pitch about owning Whole Foods when the company started in 1994. They talked about selling book over the internet. But they did mention that if they’d achieve that, they could take on more businesses.

Extra reason: Unhealthy FOMO

There is healthy and unhealthy fear-of-missing-out (FOMO). An example of an unhealthy FOMO would be to start mentioning other investors who like the idea but haven’t invested. The best way to create FOMO is to talk about the progress you’ve made, which investors have already invested, and the money is already in your bank.

In this recording from the Arctic Game Talk from April 2020, I present to above mentioned reasons.



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