Why Being Told 'No' Over and Over Again Should Motivate You in Your Search for Funding
As an entrepreneur, you need to get used to hearing "no." Here are some tips on what to do with those rejections in order to get the funding you need.
As an entrepreneur, you need to get used to hearing "no." Investors will tell you "no" when you ask for funding — often over and over again. That's a challenge that most startups must face if they want to survive long enough to start making profits.
One in four startups never receive the funding they need for their products or services to take off. Fifty-seven percent of founders finance their businesses using personal loans or their own money until they're able to secure that first round of funding.
If you're a first-time founder, it can be hard to adapt to hearing no after "no." However, a "no" doesn't mean that you don't have a viable business. It means that you haven't found the right investors and that you need to better prepare for your next pitch. Below are some tips to get you started and how to use those rejections to your advantage.
Learn from the startups that came before you
When you're starting a new company, you don't want to think about the hundreds or thousands of businesses that fail every year. Some of the most promising tech and products in the world may never have taken off simply because they couldn't close their funding rounds.
The big entrepreneur success stories are few and far between. Some of the biggest success stories come from businesses and founders that were turned away by investors at every opportunity before hitting it big.
Before Google became a search and ads giant, they were willing to sell the business for one million dollars, because they couldn't secure funding. Five months later, they managed to raise $25 million. Netflix is another popular tale of a startup that almost sold but instead stayed the course until its IPO — where it raised $82.1 million and got a $309 million valuation. Two years before that, the founders tried to sell to Blockbuster for $50 million after its growth started to stall. Luckily for them, Blockbuster told them "no."
Not every business can be Google, and it's essential that you have a realistic view of what level of fundraising you can bring in based on the products and services you offer. You might not get dozens of millions of dollars in funding, but if you're confident in what makes your startup unique, you should be able to find investors who trust that vision.
Previous failure increases the chances of a startup succeeding
An interesting statistic is that if your startup fails and you decide to try again, your chances of succeeding increase significantly.
One reason why that holds true is because the more times you hear "no," the better you become at dealing with firms and investors. If you can take hearing "no" a hundred times and keep asking the right people for money, you have the thick skin that a founder needs to succeed. Some of the most well-known businesses today were told "no" hundreds of times, and now they're at the top.
During a conversation about IPOs, Jacklynn Brennan, co-founder of Fylí, discussed not letting rejections from investors hurt your vision. From her perspective, a "no" is just a starting point for negotiations. Even if you get round after round of rejections for an idea, it doesn't mean that your next project is bound to fail.
One amazing statistic is that serial entrepreneurs have a much higher success rate than first-time founders. Around 80% of unicorns (highly valued startups) are founded by entrepreneurs with experience launching at least one company. Moreover, investors understand how valuable that knowledge is. The more experienced the founder, the more likely it is that investors will take you seriously.
Get comfortable pushing for a "no" from investors
One of the biggest challenges in raising funding is that many investors won't simply come out and say "no." Instead, they'll woo you with promises of future meetings or investments down the road.
A common characteristic among successful founders is that they're not afraid to push for real answers. "Push," doesn't mean you should be calling VCs in the middle of the night or sending emails to their personal address. What it means is that you need not be afraid to push to talk to the right people and get direct answers from them.
Individual venture capital firms get over 1,000 proposals per year. That means they need to be aggressive when picking the right businesses to invest in. However, most people you talk with might not really understand what sets your business apart from the other pitches they get. As a founder, it's your job to push to get an answer from investors, and that involves:
Following up after meetings
Submitting any information and due diligence that they request from you
Asking to see how the approval process works, so you know where you're standing
Being more proactive means that hearing "no" might come faster, but that frees you up to chase other funding opportunities. You probably have a lot of "no" ahead of you before you get to the right "yes," so you must get the negatives out of the way as early as possible.
While you adapt to hearing "no" frequently, it's important that you don't forget how to refine your business pitch. Every meeting with an investment firm allows you to refine your pitch even further. If you're using the same strategy and speech for every investor, and the response isn't good, the problem might be the pitch itself and not you or the business fundamentals.
No one likes being told "no," particularly if you're asking for money. However, if you're going to ask investors for large sums of money, hearing "no" comes with the territory. If you can't handle the rejection, it's not likely that your business will succeed over the long term.
As an entrepreneur, it's crucial that you understand that "no" doesn't mean that your business isn't viable. If you're confident in the products and services you're offering and their place in the market, you'll need to be persistent in convincing investors and firms to put their faith in you by learning from each "no," pushing for clear and concise feedback from investors and continuing your pursuit!
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