Entrepreneurs often ask why investors, and more specifically institutional investors like 2x Consumer Products Growth Partners, might choose not to invest in a given company. While the answer is often “it depends,” the following are 10 common reasons investors pass and ways to enhance the odds of securing the investment you seek:

1. Dazed & confused

A business plan consisting of 60 pages of repetitive and hard-to-follow narrative, a weak executive summary, and confusing spreadsheets are unfortunately all too common. Try to tell your story in a concise and compelling way. A few pages of text (exec summary with summary financials included), 10 to 20 slides, and an easy-to-follow, bottoms-up excel model is often much more compelling than a 60-page Private Placement Memorandum. It takes a lot more work to be concise, but it’s worth it.

2. Wrong way

Seeking growth capital from the wrong sources will prove to be a frustrating endeavor. While many investors will visit with a company that sounds interesting, don’t confuse a courtesy visit with a likely investor. In general, an institutional private equity investor with a $200 million to $1 billion fund, for example, will not invest $5 million or even $10 million in a company, regardless of excitement for the business. These funds generally invest much larger amounts per company. It’s dangerous to believe that your company will be the one exception to their investment profile.

Do your homework. Make sure you’re spending time with investors who say their “sweet spot” investment (amount of capital deployed per company) and industry focus are exactly what you’re looking for. Also, if you’re seeking capital below $1 million or maybe $2 million, you’re almost certainly looking for friends, family, individual angels or possibly angel groups.

3. All sizzle, no steak

A pure marketing pitch doesn’t work. Remember, you’re pitching an investment in your company—not selling your product to a retailer or consumer. Make sure to buy the SPINS data if you’re a small, natural or specialty products company (or Nielsen/IRI data). For between $500 and $5,000, you can know everything you’d need to know about your business in a given snapshot. The same applies to financial data—demonstrate how your financials (income statement, balance sheet and cash flows) support your proposition. Provide detailed use of proceeds and show how the investor benefits from the investment. Be specific. For investors like us, the two most important metrics are gross margins and velocity (also known as same store sales or sales per point of distribution).

4. Leaky bucket

Too many companies in our industry focus on rapidly expanding distribution and proudly say they “have distribution in 3,000 doors” yet the turns per store are weak. Far more important than breadth of distribution (it’s easy to expand distribution if your velocities are compelling) is sales per point of distribution (SPP) in a retail business or repeat order data in a direct-to-consumer or online business.

For example, a business with 25 percent sales growth sounds good. But if you dissect the consumer takeaway and there’s a -25% SPP but lots of distribution growth, we’d describe that as a leaky bucket. This situation is usually something far more fundamental than, for example, a missing management team member, having the wrong co-packer, distributor and broker issues, insufficient marketing spending, etc. Investors will be concerned. In summary, sell-in without sell-through can be more of a liability that an asset when talking to institutional investors (beyond the angel stage).

5. No margin for error

Even when subscale, gross margins need to be sufficient to avoid significant operating losses in the early days and leave enough funds “below the line” to build a branded business from a marketing and sales perspective. Gross margin percentages in the 20s and even 30s make success unlikely for food and beverage businesses while 40s in personal care and home care raise doubts. Also, gross margins rarely increase as much as founders believe strictly due to larger volumes (e.g., scaling from 30 percent to 45 percent is rare). Invest the time early to make sure your gross margins are where they need to be.

6. Know not thy business

It scares the #@%*! out of investors when founders do not know (or understand) their own financials. While most investors are not expecting founders to know the finest points of their financials the way a CFO with 30 years of experience might, know your numbers and understand the pressure points of your business (e.g. break-even point and what it takes to make your business profitable if it is not). Recently, when asked a fairly basic question about his business, the founder responded, “That’s really not my area or expertise.” Don’t let this be you!

7. Betting on the come

All small and even medium sized rapidly growing companies will have parts of the business that are “yet to come” such as new products, new channels, etc. However, investors are most comfortable when most of the core offerings and SKUs are already developed so that capital is used primarily to accelerate the business. Simply put: less risk of the unknown.

Here’s an example of a concerning situation: A business is showing excellent growth, both historically (>50 percent annual growth rate) and in forward-looking projections with growth capital (revenue of $5 million today growing to $30 million over five years). However, the $25 million of growth is made up of $2 million on the existing base business and $23 million of new products not yet introduced to the market. This scenario is likely too scary for most investors.

8. Mismatched returns

An individual investor might be excited about a 10 to 15 percent annual return on an angel investment that “beat the market” (even though according to one reputable source 50 percent of angel investments result in a total loss of the invested capital). However, these returns are unacceptable to an institutional investor that seeks to make one to two times their money (commonly referred to as 1x to 2x) per year they’re invested in an early(ish)-stage company. A private equity investment in a more mature and therefore less risky company is likely to seek about 2.5x total return over the life of an investment. Make sure you’ve looked at the return potential from the prospective investor’s seat including assumptions of further dilution down the road if there will be additional capital raised (and there usually is).

9. Failure of confidence

Most founders I know don’t intentionally set forth unachievable and unrealistic growth projections just to attract investors. However, when looking back with the benefit of hindsight most projections turn out to be considerably too aggressive despite claims of “conservative projections” and investors know this. Whether projections are conservative or not, be careful what you claim. Being credible (in all ways) is critical for an investor to back a CEO and a company.

10. Too messy

Friends and family or angel investments are the lifeblood of getting great businesses off the ground. However, they’re often structured in unusual ways, with unrealistically high valuations or with restrictive terms and agreements that make the company unattractive to new investors. It’s important to take the time to clean up your cap table, get prior debt holders to convert to equity or simplify any “out there” terms to make your company “investment friendly.” It’s worth the effort.

Finally, regardless of what stake an investor has in a company, it changes the way a founder operates even if in very minor ways. Don’t skimp in taking all the time you need to get to know a prospective investor and growth partner if they’re bringing more than just money. This is critical. But, conversely, don’t overthink the terms and structuring of an investment. The investor and the company are either quickly on the same page or not. Founders that go around and around trying to get “a better deal” will likely end up without an investment. Deal momentum is important to capitalize on and deal fatigue often proves fatal.