You earn a million dollars a year and can’t get funded?

The funding environment is so overheated that it often seems like no idea is too silly to attract investment. You might be surprised by how many companies struggle to raise money — even those that manage to bootstrap their way to a million dollars (or more) in revenue.

Plenty of startups that are going concerns, led by compelling founders, have struggled to raise funding. They’ve done the hard work of building a revenue-generating business, but cant seem to get their pitches to stick — while others turn PowerPoint decks and prototypes into a payday.

If you’re in the position of struggling to raise funds, here are some reasons why your pitch may not be resonating.

You paid $1.2 million to make $1 million

The most common case of seemingly successful businesses struggling to raise funding is when they are paying $1.2 million to generate $1 million. With the rise of DNVBs (digitally native vertical brands) and the expansion of e-commerce into ever smaller niches, the idea of VCs subsidizing the customer has become a cliché.

If you’re an e-commerce business, generating gross revenue traction early on is essentially a requirement for investors, but they also will scrutinize your cohort analysis metrics. Once you subsidize the original acquisition, are the customers churning or re-ordering? Do you see average order sizes increase over time, or do they dwindle when the subsidy disappears? Is there evidence of organic growth from positive word of mouth? If those numbers aren’t appealing, and absent measurable monthly growth, GMV (gross merchandise value) alone probably won’t excite most VCs.

You don’t really have a million dollars in revenue

Often, a startup can build a content asset or a consulting business that can generate a healthy revenue stream. The hope is to turn the audience they’ve acquired, or the work they’ve done for clients, into a product that has “venture scale.”

If you decide you want to play the VC game, just be sure to learn how the score is tallied.

These are both smart strategies, but the nature of the revenue tends to be assessed when discussing valuation.

If your VC pitch involves pivoting to a new business model to achieve scale in the future, consider discounting the value of your current cash flow. This revenue isn’t worthless: It demonstrates a full marketing funnel, a clear understanding of your customer and the ability to generate demand — all of which should increase your valuation. Still, this is not the same as earning a million dollars with your new revenue model.

There is “many a slip between the cup and the lip” and, while you’ve shown promise, there is no guarantee your new thesis will be borne out by the evidence — and that risk needs to be reflected in the price.

It’s not clear how you’ll turn $1 million into $10 million

We seriously don’t expect every company to be a billion-dollar business. Our model works with $50 million and $100 million exits, but if you’re going to raise venture capital, you should also be able to explain how you’ll achieve step-function growth — convincingly. A hockey-stick growth path to a billion dollar valuation isn’t required; it can be as simple as taking revenue from $1 million to $10 million.

We’ve met CEOs who have figured out how to build impressive, profitable companies but are unable to articulate how an infusion of capital will take them to the next level. These founders are more steak than sizzle. Better at invoicing than inspiring is good — being good at both is even better.

And being poor at both is a problem when you’re trying to raise institutional capital. If you’re not an inspiring pitch person, try to bring along somebody (ideally a co-founder) who is. Exciting investors and customers through pitches is a job requirement for startup CEOs who seek VC funding. Note: There is nothing wrong with forgoing capital to grow organically — just ask the founders of Atlassian and Lynda, who grew billion-dollar businesses without investors.

So… If you’ve built a million-dollar business and are struggling to convince VCs, we’d love to talk to you! Just know that when you’re pitching investors, not all revenue is valued equally, and it’s just one factor among many that investors will use to evaluate your business.

Bryce Roberts put it well when he tweeted “Not all good businesses are good investments. Not all good investments are good businesses.” Your favorite neighborhood restaurant might generate a million dollars a year in revenue, but it would be a bad bet for VCs. Facebook lost money for years before going on to dominate global communication. If you decide you want to play the VC game, just be sure to learn how the score is tallied.