When Angel Investors Reject Your Plan

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Entrepreneur, Business Planner and Angel Investor
4 min read
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You worked hard on your business plan before submitting it to investors. You crossed all the Ts and dotted all the I’s, or so you thought. Yet several investors have already said no. 

What’s wrong? Maybe nothing but this filtering and feedback process can be learning opportunity. If you pay attention, you can gain far more than just a thumbs up or thumbs down. It's not simply a matter of your finding the right angel and then moving full speed ahead.

While persistence is essential for successfully launching a business, blind persistence can unravel a startup.

Don’t shepherd a nonstarter and then just blame the investors. Listen. Maybe they’re providing feedback you need to know. Don’t assume the investors rejected the project due to stinginess, stupidity or a lack of vision. One rejection may be a fluke; several could signal a problem. Stop to consider what might truly be wrong and whether any of these factors apply:

Related: Founders Are From Mars, Capital Providers From Venus

1. Maybe the investors don't want to tell you the reason. When you analyze a rejection, be aware that you may not have received the full story. Investors are not obligated to put all their cards on the table, so a skewed picture can result. If they already started to invest in another business too similar to yours, they might not gamble, in effect, against their own money!

Some investors will point out a potential conflict of interest. But others will just say no. 

If on the other hand, you're given a smidgen of feedback that resonates, try to figure out exactly what's involved: Your staff? Your projections? Not every investor will reveal the full reason for a rejection, especially if it's people related. Sometimes you need to decode body language or read between the lines.

I once was part of a group of angel investors who rejected a deal because the founder blamed everyone but himself for past problems. We did not share with him directly that this was problematic. 

Related: A Step-by-Step Guide to Nabbing an Angel Round

2. Maybe the investors have a problem with your plan. If the investors don’t want to put their money down, something in your plan might be turning them off. No one likes to hear that his (or her) baby is ugly, but your business idea might not be that great. If your proposals meet with too many nos, maybe it’s not yet time to give up that day job.

Investors want a plan with a strong potential market, scalability and defensibility. They want believable numbers. If they don’t see those in your proposal, don’t assume they’re too stupid to understand. It may be you who needs to get a clue.

I've watched angel investors explain well and in detail when they had concerns that a business plan lacked a core factor. And I've seen company owners pay attention during an angel-investor rejection -- and then adjust the plan, make changes and get yes answers with later pitches. 

Related: 10 Mistakes to Avoid When Pitching Investors (Infographic)

3. Maybe the timing is simply not right. You might be too early. Don’t shrug off that notion. This rejection can be a cue for you to take a step back, gain some detachment and rework the plan. Sometimes a new idea is “too new” to be profitable. Give it a little more time and be patient. Refocus. A great business is worth the extra deliberation.

4. Maybe the rejection is a blessing in disguise. Some angel investors arrive at the point of having money to invest after becoming financially successful, experienced and knowledgeable. Many will share lessons that they learned the hard way. Take notice: There’s no reason to sink your life and money -- and other people’s -- into a black hole when the warning signs are clearly posted. And besides, at times it's better to not seek investors for your startup

Related: Would a Higher Accredited-Investor Threshold Clip Angels' Wings?

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