April 19, 2016 | 3-minute read (416 words)
We talk a lot about preparing your startup for fundraising. Preparing a pitch deck. Getting your financials in order. Tapping your network for investor introductions. Putting together a valuation of your business. There are many different angles you have to be aware of when getting ready for your big investor pitch.
But what happens if the investor says no?
There are several valid reasons that an investor will pass on your idea. It could be your product/service doesn’t align with their investment thesis. Or maybe the investor feels that the your offering is jumping into a saturated market. And of course there’s always the chance that they just don’t believe in your idea. It happens. But that’s not the end of the road. You should be prepared for this scenario...here are a few things to keep in mind.
Don’t Make It Personal
You have spent months or years pouring all of your effort into this idea. To have someone come along and say it’s not worth funding can be quite a shock. That shock is ok, but remember to keep your cool. Take a deep breath, and thank the investor for the consideration. Avoid being combative, or questioning the investor’s intent or pedigree. It’s not worth burning a very important bridge in the name of blowing off steam.
Once you’ve caught your breath, don’t be afraid to ask questions if the investor’s reasoning wasn’t entirely clear. Do you need to rethink your go-to-market strategy? Are the financial projections not impressive enough? Suspiciously impressive? Getting clarity on why the investor passed on your idea can really help inform what direction you and your company should head from here.
Just because your offering isn’t a good fit for one investor, doesn’t mean that it’s unappealing to all investors. Even though the investor your pitching has passed, they may know of another investor - or investors - that would be interested in hearing your pitch. If that’s the case, respectfully ask for a “warm introduction” to make it easier to get another pitch meeting.
Keep At It
Don’t get discouraged...if you get turned down, find out what needs to be improved and get back to work. Just remember to carefully consider the insight you gained from having that face-to-face investor interaction, and come up with a plan that gets your startup to the next level.