Rejections are hard. Whether it’s an application to a university, matters of the heart, a job interview, or anything important, rejections are hard.
One such important event for anyone as an entrepreneur or founder of a company is investor rejection. The very fact that an investor rejection feels like a shock to your system. Sometimes you question the very faith with which you started your venture. You’d think it was all a waste of time. Sometimes you could go the opposite direction, where you completely ignore the rejection and do not care about it all.
After going through quite a few rejections, here’s my answer, you need to be more deliberate about it. Here’s a quick framework for investor rejection. Start by qualifying the rejection at various level
Idea: If it seemed like the investor didn’t agree upon the idea or premise of business then it needs to be explained better. It’s good to reflect feasibility, barriers to executing the idea e.g. I want to create a flying car, while a flying car may be feasible, the infrastructure behind it won’t easily work. However, things like this have been accomplished by the likes of Elon Musk, who did create a successful electric car company but remember he had many successes and the financial wherewithal to deal with it. There’s always going to be a question of are you the person to execute it? look at Pedigree for more on this.
Market size: A common reason for investor rejection. We will need to paint a full picture of how a business is going to be a billion-dollar business and worth their time. Paint a larger canvas of where all your product and idea could get to.
Competition: This is where most of the time we, the entrepreneurs are in denial. It’s absolutely critical we look at the competition and assess them dispassionately. Sometimes competition is overlapping, very broad, and sometimes specific. In some cases, it’s usually incumbency or inertia to the way of doing things. It’s important to call out differentiation.
Proof/traction: Traction trumps everything. So, you go with customer numbers that you can prove then you’re on the top of the pile. If you’re early stage, go with engagement numbers with early customers and early results.
Stage & focus area: Stage is one of those common missteps all entrepreneurs make, including me. We misjudge the stage of investment. Some people take bets early on when ideas are on the drawing board. Some do require some customer traction and proof. Some need a growth story. Needless to say do check out their focus areas e.g. Crypto/blockchain, Marketing, AI and enterprise are different categories. An investor who focuses on AI won’t necessarily take a bet on AI unless they have that in their portfolio.
Pedigree: You may have an unproven past or lack a track record of industry success. This is one of the reasons you could get rejected. The only reflection that I have here, building credibility through execution, showing your thought process, and getting more recognition. So, there’s a bunch of hard work involved here.
Investors don’t think it’s fun rejecting your idea. From their perspective they’re looking to make a case for a big win, we as entrepreneurs have to show them it’s with us they win.
