When a capital source really says no, what does that mean? Let’s learn something from this. I tell the entrepreneur, you’ve had a number of face to face meetings with funding sources, and they turned the deal down, and that’s tough. Let’s debrief a little bit about what’s happened and what they probably told you.
Let me give you an insider’s look and decipher what they’ve said to the entrepreneur when he gets turned down. Hey, we’ve all been turned down by financing before, and I think it’s instructive to know, but more valuable as a learning tool when these standard push backs occur. They’re telling you something, so let’s be prepared. I think it’s time to read the lines between the standard phrases they get back to you on.
They say, “I liked your company, but my partners didn’t.” In other words, no. if this person truly believed in the project, he’d vouch for you and get this thing going.
If they say, “If you get funding or a lead investor, we’ll follow.” And what that really means is, once your first round of financing is completed by someone else, we’d be happy to give you more, but let someone else take the risk.
They say, “Show us some more traction, and we’ll invest.” What that really means is, “I don’t want to say no, because you may land a large customer in the interim. But right now, I just don’t believe in it.”
They say, “We’d love to co-invest with other VC’s or other angels.” What it really means is, if your deal was worthy of a VC, they’d want it all for themselves.
When they say, “We love early-stage investing.” What that probably means is a VC’s dream is to put one to two million dollars in a pre-money company and winding up owning 33% of the next Google. VCs aren’t that risky. They only want to invest in proven teams with proven technology in a proven market.
So, there you have it. We’ve heard it all before. These are typical responses when they say no. So, be prepared to hear any of these and take it with a grain of salt.
There’s always an investor to fund any deal. We just don’t want a capital seeker to shut down after the first one or two turn downs. We can help re- purpose the deal and adjust it and turn that “no” into a “yes.”