Keeping the investor informed of your progress is critical. You may find they’re ready to jump in when the timing is right
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Getting a “no” from a potential investor is tough. At first, it feels personal. You’ve poured your heart and soul into your idea, and after just 10 minutes of pitching, the investor isn’t interested in hearing more.
For entrepreneurs who tie the success of their company to their self-worth, a “no” can feel devastating – like being told they aren’t worth anything. This reaction is understandable and common among many founders.
I’ll admit, I’ve been there. After one investor walked away, I told my partner, “He just didn’t get it.” In reality, several investors didn’t put money into our company. I can’t remember exactly why because I wasn’t really listening. I was focused on pitching, not absorbing their feedback.
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The one investor I do remember, however, is the one who came back about a year later with a substantial investment. For him, it wasn’t a “no” but a “not now,” and that distinction is key.
Most angel investors and venture capitalists have what’s called a “watch list.” While many companies might be forgotten after an initial rejection, those with potential but not quite ready yet are added to this list. These companies have the opportunity to move from “not now” to “yes” over time.
Why might you get a “not now” instead of a yes? Maybe your technology is great, but your team lacks experience. Perhaps your product isn’t differentiated enough, or the market is too small. These are real barriers, but they can change over time.
What if your team brings on a strong leader? Or what if you refine your product to the point where it’s patent-protected or difficult to replicate? The key is maintaining contact with investors and keeping them updated on your progress. A company that stays on an investor’s radar has a clear advantage over one that disappears after an initial rejection.
So, what should you do when you get a “no”? Don’t argue or take it personally. Instead, thank the investor for their honesty, ask why they aren’t moving forward, and request their business card. Then, ask if you can send periodic updates as you make progress. Most investors appreciate this kind of communication. And in your future updates, address the concerns they raised – whether you agree with them or not.
Remember, investing is a long-term process, not a quick “speed-dating” event. Building relationships with investors is critical. The more you engage with them and show your progress over time, the better your chances of eventually closing a deal. If you hear the same feedback from multiple investors, it’s worth considering whether there’s something in your business model that needs adjusting.
Investors want to see growth and progress. Give them a way to monitor your development without committing to an immediate investment, and you may find that they’re ready to jump in when the timing is right.
Build enough of these relationships, and you might even end up oversubscribed in your next funding round. The key is persistence, progress, and staying in touch.
Warren Bergen is the author of Swagger & Sweat, A Start-up Capital Boot Camp.
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