Let’s say you walked out of the pitch meeting feeling uncertain about whether your investors want to fund your idea. Later you get the email or phone call—they’re not interested. What’s the best way to proceed?
“As an entrepreneur, one of the smartest things to do is when meeting an investor you’re not going to work with—either because you’re not right for them or they’re not right for you—is to understand their objections and concerns,” says Josh Hannah, venture capitalist at Matrix Partners in Silicon Valley.
The whole point of meeting with an investor, especially if it’s your first time, is to learn how to ask someone for a lot of money. Understand that what investors want to ascertain is how they can partner with your company and help you achieve your goals.
Negotiations work best when you have built a good working relationship with the investor. If you walk away with nothing else from the negotiation except for the experience of promoting yourself and your business, then that’s more than enough to prepare you for your next pitch meeting.
“The whole thing starts with building a relationship and getting to know people,” says venture capitalist Charlie O’Donnell of Brooklyn Bridge Ventures. “The process of getting funding is not nearly as formal as pitch events and contests. It starts with having a conversation with someone you think would be knowledgeable about the business idea you’re after and who could give you initial thoughts. As an investor, that’s where I want the conversation to start.”
Rejection isn’t the end of the long road to fundraising. In fact, one serial entrepreneur says that rejection was the best thing that ever happened to him because it helped him refine his ideas.
“I’ve pitched about eight or nine times,” says Scott Switzer, co-founder of Authenticated Digital, an advertising tech company. “The first investor I pitched to, who was someone I knew, basically was an outright no. The second person, who had companies that competed with mine, wasn’t an outright no, but he had a lot of questions.”
By the third investor meeting, Switzer had a completely different pitch. This time, the answer was an unqualified yes.
“Take as much feedback and advice from the person you’re talking with,” Switzer says. “These people spend so much time with companies like yours in the startup space, so it’s good to get their advice even if you don’t get their money.”
When Hannah turns away entrepreneurs, he said his approach has been to turn them down with a thoughtful and personal note that tries as much as possible to articulate reasons why he’s passing on the deal.
“The reason I decided that’s the best approach is because being turned down is a humbling experience for anybody,” Hannah says. “If I do it over email, it gives them a chance to process on their own instead of doing it live on the phone. If they want to follow up with questions, the door is open.”
Whether you’re killing it at every pitch meeting or getting rejected, know that each conversation with investors gives you the opportunity to refine your presentation and build upon your big idea. Investors have heard it all. They’ve had thousands of companies like yours say their idea is revolutionary, and that the market demand is colossal. And they’ll ask you tough questions that will keep you on your toes and help you prepare for your next pitch. So take all the feedback, take nothing personally, and take everything to heart as you move onward and upward.
Photo credit: Lauren Kallen