Innovation

Why that investor rejected you

1162

employee_engagement

Rejection is never easy to swallow at the best of times but, when someone knocks back the idea you’ve been mulling over and nurturing for the past year or so (and which you think is brilliant), it can prove utterly crushing.

Don’t despair though. And definitely don’t take this minor – for that’s what it is – setback personally. That’s because there are a multitude of reasons why your idea didn’t hit the sweet spot. Entrepreneur’s ideas get rebuffed by venture capitalists, angel investors and financiers all the time. Your task is to find out which one of the following you need to work on in order to secure your cash next time round:

They’ve ‘got one of those already’

Investors don’t want two companies competing for the same space – that way their profits are watered down. So, if they’ve already given money to a company that has a very similar idea to yours and is aimed at the same market, then it simply doesn’t make financial sense for them to take you on too. This is where you say your goodbyes and move on to the next man (this time having checked he or she doesn’t have a similar investment).

It’s ‘not the right time’

Your idea may be brilliant but could it be a little premature? Investors are aware they can’t always get a ‘sure thing’ but they’re not particularly keen on going ‘out on a limb’ either.  If they don’t bite, they’re either unsure of the market or you haven’t convinced them well enough that you really do have ‘the next big thing’ ready to unveil. By the same token, if you’re too late to the market then the answer will be the same.

You’re ‘asking too much’

You value yourself and your idea highly – rightly so. But potential investors may need a little persuading on that score, especially if they’ve never heard of you from Adam. If you’re asking for a high investment you need the experience and previous success to back it up, either that or have a very convincing future for your start-up already mapped out and ready to show them.

You don’t have enough fans on board

You haven’t shown them that there’s a great demand for your product or service. This is essential, especially if the product is brand new or the service has never been introduced to the market before eg Uber. So show them your site and how many people have signed up to your newsletter, social media pages, interest from companies, pre-orders you have etc.

You’re not ambitious enough

On the whole investors aren’t interested in a business that’s cash flow independent. They would prefer this to a loss, of course. But what they’re really after is an expanding business that grows quickly and strongly. If you haven’t shown them a decent projection and big ambition then chances are they’re not going to back you.

You asked them to sign an NDA

This is a biggie. It’s understandable that you want to protect your idea but asking a potential investor to sign an NDA means you’re restricting them from investing in similar schemes down the line. You’re putting restraints on them and that doesn’t feel comfortable to many financiers. You have to learn to trust them, or look elsewhere for cash.

You’ve no marketing plan

Or at least, you don’t have a decent one. Perhaps you’ve spent too long putting your idea into practice in terms of the product or service you want to offer, but haven’t concentrated enough on how you’re going to sell it. You need to have goals and clear paths to how you plan on reaching them.

They’re all alone

There’s safety in numbers – especially when it comes to lending money to start ups. Investors like to know there is other financial interest in your product, otherwise they’ll wonder what they’re not seeing. Find a couple of investors rather than relying on just the one. They’ll not only be company for each other, but give you a wider audience and more contacts!

Yes, rejection isn’t nice – but it isn’t so bad when you end up with constructive feedback and, as a result, even more chance of clinching that pot of gold next time round.

3 brilliantly successful entrepreneurs who faced rejection

  • Walt Disney – sacked as a reporter by his editor because he wasn’t creative enough and lacked ideas
  • Fred Smith – founder of Fed Ex was told by a college professor that his idea for a speedy international delivery service simply “wasn’t feasible”
  • Colonel Sanders – founder of Kentucky Fried Chicken. His recipe was rejected more than 100 times before he found a backer

Raj Rhonota, Angel Investor, Rajdhonota.com