TFF #014: Why you should push for investor rejections

Feb 22, 2023
This week's tip: the 4 ways to push investors to give you a yes or no.

Most founders think rejection during a fundraise is going to be black and white. That investors are going to say yes or no to you every time.

Unfortunately this is rarely the case. Most of the time there are lots of “maybes” or ghosting from investors. Its not nice for you as a founder, and doesn’t exactly help your fundraise.

But there are a few reasons for why investors do this:

  1. Investors have to reject 100s of companies a month. Sometimes it just gets too much, so they would rather not be rude this time. Especially if they like you, sometimes they don’t want to let that person down.
  2. They can’t give a good enough reason for why they are saying no. Usually due to a subconscious feeling about the founder. It can be hard to communicate with someone on something so subjective.
  3. Optionality. Investors are deeply scared about missing out on the next Google or Facebook. What if they missed something here? May as well keep it ambiguous and see what happens…
  4. You are rejecting someone, usually because of them as a person. This can come across as cold and possibly offend the founder. You do this wrong and it can be a massive reputation loss in the market: one of the only differentiators for VCs.

I can’t pretend I didn’t do any of these. Unfortunately I did, even if I didn’t like it. It was a part of human nature, the work-load and the volume of founders that were coming to me.

Usually it means you fall into never really knowing where you stand with the investors.

Do you:

  • Keep in close contact as you build?
  • Reach out to them again next round?
  • Never speak to them again?

It’s hard to know when you get a "maybe".

But when an investor doesn’t want to invest into you, and they are just “kicking the can down the road”, you are wasting your time. Because they were never going to invest into you anyway.

So here’s 4 steps on how to push investors for a real answer:

1. Consistently do pipeline reviews

Doing pipeline reviews is sales 101, and like I always say, fundraising is just high-ticket sales!

I would recommend you to do this every 6 months and during your actual fundraise process. You want to see where you stand with each investor, and change them as a priority with whatever information you get back.

If you don’t actively do this, you can never know where you stand with each investor.

So you don’t know which ones you should focus on, nor do you know which ones you should push for a real answer.

You should be looking for:

  • Does this person have authority in the fund?
  • How often are you in contact with them?
  • Do they seem excited? Are they helping you out?
  • And if you are fundraising:
    • Have they stopped emailing you?
    • Where are you in their process?
    • Are they moving fast?

You have to make sure you look for their actions, not what they say. You want to be checking if investors are actually doing things that show they are interested.

Because if they aren’t, it usually that means they aren’t excited enough yet.

2. Focus on getting that next meeting

I have found that most fundraising founders are too scared to ask for that next meeting.

You should be pushing hard with investors asking for:

  • More meetings
  • Where they stand
  • What the next steps are

And don't be fearful that if you push too hard you might hear “no" faster.

To be successful at fundraising you may have to hear 30+ nos from investors before you get to 3-4 investors who are excited by what you are doing. But if you don’t risk it and push harder, you’ll never get those 3-4 investors potentially wanting to invest.

If you are in your fundraising process: it’s about trying to get an investor to meet you again. The best way to do this is to discuss some of the major areas they are excited or worried about your company.

If you are building a relationship for a future fundraise: it’s about getting a meeting or event together. Either a coffee catch-up or a scheduled event or helping the investor in some way (usually due to your domain expertise).

As you can see its always about getting that next meeting, because it’s a lot better to get 30 quick nos and 3-4 quick yeses instead of 6 months of “maybes”.


3. Create urgency

When an investor has time to think about you, your fundraise dies. You've got to create urgency in your fundraise.

Now look...

You are busy as a founder. Fundraising is just a part of your business plan and you should be respected for that.

So make investors know that you are busy. You have many other investors and opportunities you need to focus on. That if they don’t give you a solid answer you will be gone.

Is this risky? Yes.

However, it conveys urgency, it implores investor to respect your time as much as they respect their own, and it gives you the courage to face rejection.


4. Don’t take the nos personally

Most founders never do the above because they are scared of a rejection. A maybe is nicer; it feels like you are doing something. As if you may still get something from them in the future.

But you have to embrace rejection. It will unlock your fundraise, trust me.

By embracing rejection and forcing a real answer, you can have more time to focus on the investors who would actually want to invest into you.

If you wanna be successful you gotta take that risk.


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