Note to readers: #HowTo – The Tutorial Series is designed to give our readers an edge on matters of competitiveness, upskilling/reskilling and knowledge gathering. Essayed in a lucid, snackable format, the series brings in some of the most relevant voices on a subject, so that you benefit the most in your business or career. In this episode, we examine the phenomenon of investor rejections, the way to deal with them and win. You can read the previous stories in the series here, here, here, here, here, and here.
Investor rejection is a reality that any start-up founder has to endure. Seasoned founders take it on their chin and move on, but it is usually a tough reality-check for newcomers. Many of these newbie founders are toppers in schools and colleges, having rarely experienced ‘failure’. So, when their start-up proposal gets rejected by investors, it’s often a bitter pill to swallow and a shattering blow to their confidence.Eela Dubey, co-founder of EduFund (investment advisory firm that helps parents plan higher education of their children), had to approach more than 65 investors including angels and venture funds before she was able to raise a million dollars. “99% of the investors will turn you down. Out of all the ‘no’ we got, only one investor told me why we got a ‘no’. Your boat gets rocked often, but you keep pushing,” she says.Facing a series of rejections can hit any founder’s self-esteem but how you get back up after the blow often determines how high you soar. Let’s examine how it can be handled well.Don’t take investor rejections personallyThe founder needs to think of the whole process as some sort of a filter. All founders think that their start-up idea is good, but it’s the job of the investors to judge it. Remember that investors will never let a great idea pass, since it’s in their interest to fund a scalable project. It’s possible that they may misjudge an idea though, hence one doesn’t need to take that personally. Maybe they are helping you to think over that plan again, or junk the plan and put together a completely new one from scratch.
According to Neeraj Tyagi, founder of investment vehicle WeFounderCircle, investor rejection could be seen as an opportunity to do the right revisions. “Consider investor feedback carefully, rather than viewing it as an outright ‘no’. Founders should take the investors’ rejection as an opportunity to do a deep-dive diagnosis about their business plan,” says Tyagi, one of India’s leading angel investors.
Ask the investors to give you specific advice and use that to make relevant changes whether it is related to your plan or pitch deck. “If the founder is seen to regularly update, even after facing rejections, it can work like magic. It showcases the openness and learning attitude of the founders. Investors appreciate this approach,” says Tyagi.
It takes a minimum of seven meetings with a VC to close an investment deal, says Sanjay Mehta, leading angel investor and founder of 100X.VC. Check the list of VCs pitched to and the number of meetings done. If it crosses seven meetings then mark them as a good qualified VC lead; until then it’s only in a prospecting or discovery mode.
Entrepreneurs need to decode pitch meetings and accordingly prepare for the next one. If there were too many questions around market size, it can be gauged that VCs do not believe that your idea can scale. If in the pitch meeting the talks are stuck on the business model, then the investors do not seem to believe in your unit economics or pricing ability, says Mehta.
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