After a startup investor turns down your idea, what is the first thing you should do as you approach next steps?
1. Understand Why
Ask why they are turning you down. Perhaps it’s them (not a fit for their parameters) or you or your product/service. Then take a step back and evaluate what they said. Try to be unemotional about it, which can be hard. Perhaps there is nothing to be gained there, but perhaps their feedback can help improve your product/service or pitch for your next meeting.
2. Take Immediate Action
It’s been my experience that for every eight meetings with an investor, I’ve had one investor sign on. If I got deterred every time one of those eight turned me down, we would never have successfully raised money as a company. When this happens, I solicit feedback to improve, take immediate action to keep moving forward and maintain my persistence and enthusiasm.
3. Apply Some of Their Feedback
Being turned down is never fun, but there are positives in the process. If they gave you notes on why they passed, take a long hard look at them. See if there is anything you may have missed in your initial pitch and then implement that moving forward. Not all notes will be helpful, but there will be some gems.
4. Poll Your Target Audience
Startup investors may not understand what you are doing. It’s more important to find out from your potential audience. Consider doing a crowdfunding campaign to see if there is interest and value among those who would potentially buy that idea.
5. Tighten Your Pitch and Keep Going
You will always hear “no” before you hear “yes.” Don’t take a single no as a blow to your idea. Just know that they weren’t the investor for you, take this time to tighten your pitch and move forward. Eventually you will find an investor that gets you, and you will be glad it worked out that way.
6. Focus on What You Can Control
When a prospective investor turns down your pitch, move on. You’ve got a company to keep building and a sea of potential investors to find the best fit. You’re going to hear a lot of no. My default is to focus on improvement through iterating, including addressing any weaknesses revealed by previously pitched investors and hindsight. Until the right investor says yes, the plan is unaffected.
7. Ask to Add Them to Your Investor Updates List
Any seasoned entrepreneur will tell you that an investor who doesn’t want to invest now doesn’t mean they won’t invest in future rounds of funding or even later on in your round. It’s important to keep potential investors in the loop as you overcome obstacles and hit your goals. Ask if you can keep them updated by adding them to an investor list that you’ll regularly update.
8. Make It More Than an Idea
The investment cycle is waning, which means ideas are a dime a dozen. Instead of going to an investor with an idea, go to them with a prototype, customers and numbers — even if it’s all small scale. If you can show them that you’ve been out in the real world working with real customers and the data says you’re on to something, that’s a much more convincing case than just an idea.
9. Try a Different Pitch
You probably developed a list of investors you wanted to target early in your process. Go on to the next investor, but don’t be afraid to target the same investor with a different pitch. Reevaluate your business model and your growth strategy. More and more investors are looking for market disruptors. What does your business have to add that’s unique?
10. Reevaluate Investor Funding
There are many ways to grow a company besides giving chunks of it away for money. You can network and find strategic partners that compliment you in areas where you are weak and apply lean startup principles. This will enable you to retain more equity in your startup and make sure you don’t bite off more than you can chew.
11. Bootstrap It
My pitch was turned down in 2009 and we decided to bootstrap our business. When building out a business plan, it’s difficult to chop away parts of your plan that you believed necessary to succeed. I see more successful outcomes for entrepreneurs who start with a lean business plan and work up from there.