How Can Entrepreneurs Decline Investors With a Difference
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To investors who que up to dump capital in billion dollar idea start-ups or try to get over-involved in businesses, being upfront may not always be the best way for entrepreneurs to simply say no to them. So how you say no to investors who still wouldn’t mind?
We offer luxury hotel stay vouchers to customers for Rs 2,999. It excludes breakfast costing Rs 800 for a couple, which otherwise costs Rs 2,400 on an average. So our investors wanted to increase voucher price to Rs 3,799 to include breakfast in the package. While I explained to them that Rs 2,999 price was decided keeping in mind the aspirational middle class, they were quite pushy to implement the higher price. So I decided to put my foot down to stop them. What our team did was that we simply called up our existing 100 customers and offered them the voucher worth Rs 3,799 including breakfast. However, the response was a vehement no. I showed this data to the investors to explain them it is not the right strategy to acquire customers. So a data-backed logic convinced them because based on one’s gut feel it is not easy to say no to investors. - Puneet Gupta, COO and Co-founder, icanstay.com
Put on Standby
SAIF Partners had approached to invest in us but as an entrepreneur, it is important for me to understand how I am scaling the company with the existing funds that I have. To raise more funds, there has to be a bigger picture instead of blindly take whatever capital is available. You can get instant sales with more money but that’s not how you build a brand. At the same time, it is also important to acknowledge the knowledge and interest of investors reaching out to you which can be extremely valuable at a later stage. So instead of saying no, I explained to them about our step-by-step plan to reach to the point where I would need their involvement to take the brand to next level. This increases your value for future investments. Even today, I am in touch with them and they give us regular feedback. - Yatin Hans, Co-founder, Bigsmall
Investor interactions are always on certain dimensions like whether there can be a chemistry between them, entrepreneurs understanding of the business, investors backing similar companies, investors holding period in a company etc. Also, it is important to build a healthy relation with them. However, if entrepreneur doesn’t agree on either of such dimensions for instance, investor making competing bets then he/ she must explain it by saying that “while I appreciate the value that you bring to the table but personally I wouldn’t be comfortable sharing my detailed business strategies since you invest in my competitor companies.” Once it is clear, you must build personal relationship by having dinner together, inviting them to house to engage with the family members etc. I have dinner discussions with each of my investors to share similar values.- Tushar Aggarwal, Founder, StashFin
(This article was first published in the May issue of Entrepreneur Magazine. To subscribe, click here)