Ten Things to Do When Your Investment Is Denied
Learning and adapting is key to dealing with rejection in business. It’s not a failure to get investment. This blog will educate you about how investors work, how to strengthen your business, and how to pitch your next meeting.
After an investor potentially rejects your proposal, it can be hard to know where to start. This 10-step guide will help you understand why your proposal was rejected and how to adjust it.
1. Ask Why Your Company Was Rejected
It is important to get good feedback before you start. Many of the investors I have met and worked with are open to giving good feedback, even if it is rejected. It might not always provide the answers you need to grow your business.
You should quickly and politely ask why your company was turned down. Make sure you express your appreciation for the feedback. It is important to let people know that you won’t continue to argue. It is a normal part.
Be specific and clear in your questions. The exact information you need will depend on how your pitch performs, but it is worth asking.
- Which businesses were accepted by your business when yours was not?
- Which areas in your pitch or plan can you improve?
- Did you have any parts of your presentation lacking sufficient context or supporting information.
- What are the next steps investors suggest you take?
You may never find out why if you don’t ask.
2. Examine the Reasons Behind Rejection
You shouldn’t accept feedback or understand why your business idea may have been rejected. You need to take a step back from your business idea and analyse it. Sometimes, it is not the truth or the root cause of your rejection.
One example is a startup that I know of who said it rejected them because they didn’t have five-year financial projections. The same investors had previously invested in several startups with only one-year projections monthly, and two more years of annual projections. Regardless of the problem, these investors did not share it.
Rejection of Common Business Investments
There may be good reasons that the investment community isn‘t investing in a plan. Here are some common reasons;
Inexperience
It doesn’t matter if you have several years of experience as an entrepreneur. However, you will need to have the right level of experience, qualifications, and/or work history to be able start and grow your business. A team consisting of two to three people with backgrounds that demonstrate they are capable of doing what they need to do is generally better than one founder.
Inadequacy of a Market or Product-Market Fit
When they give you a check, investors usually want to see if your value will increase. Investors want to see your business be able to scale up. If your business model is not scalable, this will make it difficult. This is even more challenging if your business model doesn’t easily scale.
Is it possible to double your sales without increasing your staff? You may have to rethink your business model if the answer is no.
Your Business Is Not Ready for Growth
An important fact that outside investors don‘t understand is that they won‘t make any money with a company that is cash-flow dependent and that don’t want to see a faster and larger income. They want to see a company that is already moving and not just sitting on the sidelines waiting for investors and opportunities.
Experts mean “get traction”. This could mean creating a prototype, launching your website to gain early subscribers, or launching an application in the App Store to get early pre-downloads. No matter what your options, you should be focused on getting users, distributors or some big clients early. Anything that proves to angel investors that your company is viable.
3. Your Business Idea Is Important
Funding is not the only thing that will determine your business’s success. It is possible that you will not get any outside investment, and you might have to continue your business without it.
This doesn’t mean that your business is bad. Outsiders are unlikely to invest in many good businesses. They are those that can be run by owners and grow without capital investment.
These businesses can be great for the founders but not for investors. One of these businesses might be yours.
You may also have a bad idea for a business. You may not be able to solve the problem with your product or service. It may be difficult to enter the market or increase the size of your market. You may have a business that is not stable and does not have enough traction to continue growing long-term.
No matter what the reason, your idea may not work. To attract investors, you may have to create a pivot .
4. Revise Your Plan
Review your current business plan and take the lessons learned from investor feedback. Are there any areas that need to be improved? Are there any areas of your business plan or financials that you are not happy with?
You might need to add the correctly suited people to your company, refocus your market, strengthen your intellectual property protection, validate your business with early sales or anything else. You may also be seeking out different investors, a new forum or a higher investment amount.
No matter what, it is important to review and always update your plan. Your business’s best self should be represented in your plan.
5. Research Investors
Do your research on how investors approach if you haven‘t already. Investors have preferences about where to invest. This can include the type of industry, how much, and when it is to be invested. You can increase your chances of finding investors who will be interested in your project.
6. Other Funding Sources Available
You may want to look at alternative funding options if you are having difficulty connecting with investors. There are many options available to you, including traditional loans, business/company credit cards and grants, as well as pitch competitions and crowdfunding. Consider and map out how you plan to use the funding and how much.
Bootstrapping is a great option if you don’t have the funds. To get your business started, connect with family and friends, take preorders or sell valuables. This route can make your business attractive to potential investors.
7. Investors Are Not to Be Blamed
Many people rush to blame investors. They didn’t grasp the concept. They didn’t listen to the correct supporting research. They sabotage the deal because of one key person. One factor was a reason they were biased.
Even if you believe any of these things, it is important not to talk like that. This will make you and your company look bad and could even cost you your investment opportunities.
Most likely, this is not the case. You must remember that you still need to try and convince people to back your idea. You will not be able to predict their preferences. They may also have preconceived ideas and biases.
Do your absolute best to prepare. Take it all in stride and go through the steps carefully in this article to improve next time.
8. You Can’t Blame the Process
People will blame the process even if they aren‘t blaming the investors.
They would have been more widely known sooner. They could have used a different format or forum. They maybe should have made the first appointment or the last. They potentially could have made the pitch more appealing or kept the summary shorter.
It was what happened, and it is impossible to change that. There possibly may have been some slip-ups or less than ideal circumstances during the pitch. However, you have to accept that this will happen over the course of your business’s life.
It is best to take note of the things you want to improve. It’s not worth getting bogged down in what went wrong or how it went. It’s time to think about what you can do next time.
9. When to Stop Investing
It can be difficult to start and manage an ongoing business. It doesn’t end with investors rejecting you.
Do not get too attached to the need for funding. You don’t likely need funding right now if you are building momentum and your business is growing. Instead of spending your time looking for investors, start to invest in your business.
10. Recognise That Funding Is Not Everything
Remember that many businesses are usually started with no investors. If your product-market fit is solid, you are providing a valuable service that people need, then you might be able to bootstrap and build the company. If you do not have a product-market fit, it is better to identify the issues early and choose to move on.
Embrace Rejection
Entrepreneurship is a process of rejection. Vendors, customers, employees and investors will all reject you. It doesn’t matter how many people reject you. The most important thing is to take it all in stride, and use it as an opportunity to grow your business. There are many funding options available and some investors may not always be right for you.
Get in touch with ActionCOACH today to learn more about how they can help you deal with rejection of investors in your business.
ActionCOACH can help you develop and grow your business through a wide variety of services, from business coaching and mentoring to sales training and marketing assistance. No matter what stage your business is in, our team of experienced coaches can help you take it to the next level.
If you’re serious about growing your business, ActionCOACH is the perfect partner to help you get there.
Contact us today at 01305 566150 or email westdorset@actioncoach.co.uk for a FREE business coaching session.
