Did you have investors who snub your business? This is entirely normal. In a typical year in the U.S., more than six million companies are launched. Around 30% of them receive angel investment, and less than 5,000 will receive venture capital.
Over a decade of investing with angel investors and participating in numerous pitches, I’ve never seen a business succeed without multiple rejections.
No matter if it was an angel investor or venture capital, small business loans, or another type of investment. Being rejected is indeed an aspect of being an entrepreneur. It’s the norm and not an exception.
Ten things you can do if your investment gets rejected
Rejection in the business world is about adapting and learning. If you don’t qualify for investment, it isn’t a loss; it’s an opportunity to grow your business and the skills you have developed as a business owner. It helps you learn how to interact with investors, which areas of your company need to be strengthened, and how to enhance your presentation for your next investor meeting.
It’s sometimes difficult to determine what to do after an investor declines your business plan. It is good to follow this 10-step guideline to determine why your proposal was rejected and make adjustments.
Find out why your company was not accepted
I cannot stress enough the importance of beginning with positive feedback. Most of the hundred or so investors I have met and worked with strive to provide good input despite the possibility of rejection. However, it could not be the right solution you require to grow your business.
It would be best to ask quickly and courteously why your company was deemed unsuitable. Make sure to emphasize your appreciation for the feedback. Be clear that you’re not going to fight. It’s an ordinary aspect of the process that’s important and valuable.
Examine the reasons behind the rejection
Even after you have received feedback and clearly understand why your idea was not accepted, don’t just take the feedback at face value. It’s crucial to look at the situation from a different angle and take an analysis. Sometimes, it’s not necessarily the truth or why you were disqualified.
For instance, I know a company whose investors claimed they had rejected them because they lacked financial projections for five years. The same group invested in several startups with only one year of annual points and two calendar years with yearly forecasts. Whatever the issue’s root was, these investors didn’t know the subject.
In a separate instance, I observed one angel investment company turn down the director who, in his talk, blamed each loss on someone other than him. They did not tell him the whole truth: they didn’t want to invest in someone who constantly blames others. Instead, they offered the guy a bunch of slang phrases, such as “you’re not there yet” and “too much noise in that market.”
I’ve also witnessed several instances of founders who did not receive excellent feedback because they didn’t accept input. They would argue every point that investors attempted to make. The investors then stop trying.
Be aware that the process of investing is an instrument to filter. It can push some small-business owners up to the top while keeping others away from the way. This sorting process is suitable for entrepreneurs inclined to pay attention to it.
Common business investment reasons for rejection
If investors don’t invest in a particular plan, it could be because there are several good reasons for it not. Here are some typical reasons:
It is not necessary to have a long history of entrepreneurial experience within your resume. The proper knowledge, qualifications, or expertise proving your capability to establish and expand the business is essential. In general, a group of two or three individuals with backgrounds that show they can do what they are required to do will be more effective than one founder.
Insufficient market or even a product that is suited to the market
Investors want an opportunity to increase your value when they send you the check. They want their business to be able to grow up. This can be challenging if your business model isn’t capable of scale. This is even more challenging in the absence of consumer desire.
Can you increase sales tenfold without increasing your staff by a proportional amount? If not, it is possible to reconsider your business model.
Your company isn’t set up to grow
One of the most misunderstood aspects of investors from the outside is that they aren’t able to make money from an established company that’s cash-flow agnostic and doesn’t wish to raise more funds to help it grow more quickly. They are looking for an advancing company, not standing in a pond waiting for investment.
Experts say that when they talk about gaining momentum. This could mean creating a website to gain early subscribers, creating and testing the prototype professionally, or launching your app early on the app store to receive pre-downloads. Whatever you decide, concentrate on gaining distributors, users, or even a handful of early customers. Anything that can show angel investors that your business is credible.
Take a look at your business concept
Don’t base the success of your company on the availability of capital. There is a chance that you will never receive an outside investment, and you may need to go on without it.
It doesn’t mean you’re running a poor business. Many good companies aren’t appealing investment options for investors from outside. The most successful are those that expand and flourish as owned enterprises without capital.
They are great for their owners but not the best option for those not inside. You might be part of one of these companies.
On the contrary, you might have a flawed business concept. The product you offer might not address the issue. Obstacles to entry or scale of your market might not be long-term. The financials of your business may indicate instability and may not have enough momentum to continue to grow over time.
If you’re in doubt, consider whether your concept isn’t working. It could be necessary to change your strategy to attract investors.
Revise your plan
Learn from any feedback from investors and go over your company’s plan. Do you have anything that you should be focusing on or revising? What elements of your business plan, plan, or financials are slowing you down?
It could be about adding the most suitable individuals to your staff, shifting your focus, increasing intellectual property protection, proving your company’s existence with initial sales, or another. You may also be searching for new investors, a new forum, or an alternative amount of investment.
In any case it is, you should review and revise your strategy. It must reflect the most effective version of your business, and it may not be in the moment.