What to Do When Venture Capitalist Turn You Down

17 Nov, 2016 / Comments: Comments Off on What to Do When Venture Capitalist Turn You Down / By

As an entrepreneur, you’ve put blood, sweat and tears into your work and when you finally approach a venture capitalist you may feel you’re entirely ready. You’ve done your homework, you’ve had numerous conversations with board members, advisors, your management team, and mentors to seek advice. Chances are you received a lot of initial interest from venture capitalists who want to learn more about your business and see if it’s worth investing in. However, sadly due to the competitive environment, more often than not you may be hit with an “I’m sorry, but we’re not the correct fit for your funding.” There are a lot of reasons why this may occur, many of which have nothing to do with your company, but more the investment criteria of the venture capitalist. Let’s take a look at some things you should do in the case that you are denied by a venture capitalist.

 

Don’t Take the Rejection Personally

It’s easy to say that you won’t take a rejection personally, but much harder to do. You’ve worked extremely hard to get your company on the right path and someone telling you that they have no interest in it can be a slap in the face. However, you need to keep in mind that more likely than not, it had nothing to do with your company and more to do with the venture capitalist wanting to find the best fit for its criteria. Try to focus on the facts and realize that if a venture capitalist turns you down, they probably aren’t the ones you want investing in your company anyway.

 

Don’t Be Afraid to Ask for Feedback

Don’t be afraid to ask the venture capitalist for some feedback on his or her decision. It’s an excellent opportunity to find out what’s working for your pitch and business and what you need to work on to become more interesting to venture capitalists in the future. Use the information that the venture capitalist gives you to rework your deck, financial model, pitch, etc.

 

Keep in Good Standing

Just because your company wasn’t the right fit currently, doesn’t mean it won’t be in the future. Although you may be hoping to only need to raise one round of capital and never have to do so again, chances are you’ll need more money in order to keep your company going and raise it to the next level. In fact, closing the doors to venture capitalists in your company’s future will cause you to miss out on good opportunities. Make sure that you stay in touch with the venture capitalist and keep in good standing with him or her. Don’t be afraid to reach out to them again in the future to inform them on how your business is progressing.

 

Do Your Homework

It’s important that from the onset you don’t have unrealistic expectations of your venture capitalist, especially in the beginning stages of your business. Make sure that you do your homework on the venture capitalist before giving him or her a call to find out the kind of businesses they typically work with. If you’re not a good fit currently, then don’t be afraid to still have a conversation with them so that you get on their radar and tell them a bit about where you want your company to go in the future.

 

Being turned down by a venture capitalist can be quite unnerving and of course not what you hoped for. However, it’s important to realize there are tons of ways to keep your relationship with that venture capitalist productive and potentially beneficial in your company’s future.

William Mahnic
William Mahnic is a Finance Professor at Case Western University and has spent more than 20 years in the finance industry before becoming a professor. Mahnic has appeared as a commentator on both TV and radio talk shows including NPR, Crain's Cleveland Business, WKYC 3 and The Washington Post. He has been interviewed in BusinessWeek, Wall Street Journal and The Los Angeles Times.

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