Chapter 4 - Investor Relationships
IN THIS LESSON
Talking to Investors: Making the “No” Work for You
Does “no” from a potential investor mean, no? Not necessarily. Let’s let you in on a thinly veiled secret that the pros know: when an investor tells you “No” about investing in your start-up company, the “no” could mean many different things. Because of this common reality, you have hope for your start-up, even when an investor says “no.”
The key to your success is rooted in overcoming the “no” over time or at least allowing the negative-sounding response to redirect you to a more positive response in the future. Don’t give up. Embrace the response and then – and this is important — focus on building a relationship with the investor.
An investor’s “no” could mean any of the following:
No, not right now (Code for: Maybe in the future)
No, I don’t have the cash right now (Code for: I may have the money in the future)
No, this isn’t my industry (Code for: I may know someone in your industry who would be interested)
No, I am not quite understanding what your company does (Code for: I may need to study your company more closely before I invest in your company)
No, I am not sure there is a market for what your company offers (Code for: If you convince me there is a market for your offering, I may invest in you in the future)
A “no” can be temporary. This is why you cannot lose heart. Focus your mind on accepting that you will get no’s along your start-up journey, but every “no” you get essentially gets you closer to your next “yes.” Every “no” you get gives you a new opportunity to build a relationship with the potential investor and to educate the person in a personalized way. This is how you make the “no” work for you.
Make the “No” Make Your Company Better
Ask the investor why he/she said no to you. Were the financial projections not impressive enough? Is the product presentation too flat? Do you need to take a fresh look at your go-to-market strategy? You may uncover something that is holding your business back. By hitting the speed bump of an investor’s “no,” you may gain an insight that will shift your company onto a better path. Rejection can help you refine your ideas. You may end up thanking the investor, but you need to stay open to feedback.
Ask the “No” Investor for a Referral to Another Investor
You can gently ask the investor, who said no, for a referral to another investor who may be interested. Ask the naysaying investor for an introduction, such as sending an email to another investor and copying you. You may get a referral to a new investor who funds your company in a significant way – and it all started with a “no.”
Rather than getting offended when an investor turns you down, you should thank them for being honest, so you can move on. They are not leaving you hanging. But don’t give up on them either. You may not get a “yes” until the third or fourth meeting, which is when you show how you have refined your ideas since the first meeting with the investor. To sum it up, a “no” is your opportunity to get better, get a referral or get a move onto building a relationship that could help you down the road.