Getting a “no” from any prospective investor can be hard to take. At first glance, it’s insulting. You’ve poured heart and soul into an idea and after 10 minutes of pitching, the investor doesn’t want to hear more. For the entrepreneur who wears the success or failure of his company as a reflection of their own self-worth, “no” is devastating. To them, it’s like being told that they aren’t a valid human being and that upsets a lot of entrepreneurs.
I am embarrassed to admit that I once told one of my partners that the investor who had just walked away “didn’t get it”. A lot of investors put money into our company, but many did not, and I can’t remember a single reason why they didn’t. I don’t think I was really listening. I was pitching hard and talking a lot, but not listening. The one investor I clearly remember, however, is the one who came back about a year later and put in a substantial sum. For him, it wasn’t really a “no”, it was a “not now” and there is a big difference between the two.
Every angel investor and venture capitalist has what is called a watch list. There are many companies that are immediately forgotten, but the watch list is a place for those companies to live that haven’t quite measured up for whatever reason that have potential to move from “not now” to “yes”. Maybe they have a great technology, but no experience. Maybe they have a good team, but the product doesn’t have sustainable differentiation. Maybe the market they’re chasing is just too small. But, what if something changes? Perhaps the weak team finds a leader, or the good team furthers the innovation to the point where duplication is unlikely or patent protected. The team that keeps in touch with investors who allow occasional updates maintain a distinct advantage over those teams who throw away the business card of the less than enthusiastic investor.
Just heard a “no”? Ask why the investment will not be considered – but do not argue with them. Thank them for their candour, ask for their card, and ask if you can send updates as progress is made. Most investors appreciate this kind of contact. In later communications, address the concern – whether it is valid or not.
Investing is a process and not a speed dating event. If you develop relationships with investors, you’ve got a much better shot of closing more of them. If you start to hear the same concerns repeatedly, maybe there is something that needs to be addressed.
Investors want to see progress. Give them an avenue by which they can watch your progress without investing and they could be there for you in your next round. Do this with enough of them and you just might just get over-subscribed.
Warren Bergen is President of Alberta-based AVAC Ltd. and author of Swagger & Sweat, A Start-up Capital Boot Camp.