6 Tips for Overcoming a 'No' When Seeking Funding
As a new entrepreneur, unless you’re dipping into your own private fortune, you’ll probably have to spend some time fundraising to collect enough capital to start your project.
For most founders, the process is difficult and time-consuming but necessary for the potential life of their business. If you haven’t been through the process before, the experience can be even more harrowing, since you won’t be familiar with the customs and conventions of fundraising.
Encountering a no from an angel investor, friend or even a possible crowdfunder can be disheartening. But don't let it get the best of you.
Consider these steps to increase your chances of being reconsidered, improve your potential for obtaining financing in the future and in general relieve the stress of securing funding:
1. Be professional.
As you go through the fundraising process, keep your behavior and actions as professional as possible. It’s not disrespectful to follow up with a possible investor, even if he or she has said no to you before. But if you hound this person constantly with no new information, you might as well rule out any possibility that he or she might reconsider your pitch.
On the other hand, if you politely thank the potential investor for his or her time and follow up in a few weeks when you’ve gathered more information or adjusted the business model, you’ll have a much better chance of securing that funding.
2. Understand that raising capital is a long-term goal.
Anyone passionate about a business idea probably wants to start working on it as soon as possible and is excitedly anticipating the company's launch. You won't succeed in having your business funded overnight, though, unless you’re incredibly lucky. Fundraising is a long-term process and your project may remain at a standstill for longer than you would like.
Even after landing a commitment for funding, closing the deal can take months. Raising funds often ends up being a long process, so don’t let a short-term obstacle get in your way.
3. A no can be part of the road to yes.
Great business ideas may not be explosive hits immediately. The road to their acceptance can be littered with obstacles, failures and rejections.
Successful entrepreneurs might happily recount for you the numerous times they were rejected over the course of their careers. Take solace in the fact that many people who have accomplished things have done so only after an initial rejection.
4. Contemplate all the options.
There’s no right or wrong way to pursue funding. If one channel seems to be generating more obstacles than opportunities, change your strategy. When most people think of raising business capital, they think of angel investors or private lenders, but several other options exist.
You could apply for loans and grants through federal and local government programs for small businesses after checking the Small Business Administration's website or pursue crowdfunding through sites like Kickstarter or GoFundMe.
Choosing the right channel (or group of channels) to pursue funding could increase your chances of arriving at a yes.
5. Review the business model.
Use an initial rejection as a learning opportunity. Examine your business model for any major flaws or weaknesses or flat out ask the rejecter why he or she passed on your project.
Perhaps your research doesn’t support your assumptions as closely as you thought. Or the project's profitability might appear to be unpredictable over the course of time. Attending to such issues can make your overall business idea more attractive to other potential investors or might be enough to change the minds of initial rejecters.
6. Improve the pitch.
In a way your pitch is a consolidated version of your business model and should be strong enough to capture the attention of potential investors. This is especially true if you tackle crowdfunding.
When you speak for a minute or write a couple of sentences about the business, you should be able to explain the core concept and exactly why it’s a valuable investment opportunity to a prospect. If you can’t do that, your pitch needs refinement.
If you’re fundraising and already encountered a no, then congratulations. You’ve successfully completed the first step of the journey toward funding your business. There are dozens of routes to successful fundraising and none are straight. So when you encounter a major obstacle, take a minute to breathe, re-evaluate things and then keep working toward your ultimate goal.