Dealing with rejection

It happened again. You walked into a VC partner meeting with a ton of confidence. Your first meeting went great, with the associate gushing over the potential of your startup. Then, you got an introduction to the partner specializing in your industry. Another slam-dunk. But today at the partner meeting, you took some hard shots. There were a couple questions you didn’t handle cleanly. The partner at the far end of the table had her arms crossed defiantly the whole pitch. And by the time you made the drive from Sand Hill Road back to your office, you already had that dreaded email in your inbox:

“Thanks for taking the time to present your company to XX Capital. While we were very impressed with your passion and knowledge of the industry…”

All of a sudden, you’re getting flashbacks to being 17, opening the mailbox, and pulling out that little, standard envelope with your favorite college’s emblem on the top left corner. You know that they can’t fit an entire enrollment packet into that one-page letter.

Even the very best entrepreneurs in the world get rejected over 50% of the time that they pitch an investor. When Mark Suster tells his fundraising story, he makes it very clear that 75% of investors turned him down. And this was when he was pitching two startups that ended up with very successful exits.

So how do you handle the constant pressure of rejection?

The first lesson is to never shy away from it. The only way to successfully run an investment round is to run startup funding as a sales funnel, identifying as many qualified leads as possible, then running through them with passion and intensity. If you get so afraid of rejection that you slow down your process at all, you’re finished. There’s no way to half-ass the funding process.

The second lesson is to just get used to it. Over the course of two startups, I’ve already run through close to 100 pitches. My rejections are definitely over 50%, and likely even higher than Suster’s 75% number. Prepare yourself at the beginning of the process for short-term failure, and know that they’re practically a requirement on the path of startup success.

The third lesson is to celebrate the wins. All those rejections become worth it when you finally get an investor to say yes. Really savor those wins. Drink a six-pack with your team. Accept the pats on the back from your friends. Don’t let anyone tell you that it’s not a big deal to raise money for a startup. Fundraising is hard work, and is often a vital part of growing a rapidly growing, scalable startup.

The fourth, and most important, lesson is to learn the ‘why’ of the rejection. Sometimes the investor doesn’t feel comfortable with the industry. Other times, they’ve been burned in this space before, and are hesitant to jump back in. There are times where investors are simply distracted by external causes, from an upcoming trip to a pending divorce. These are all things that you are not expected to control.

However, if the investor was confused by your pitch, missed the key value of your startup, or disliked the delivery of your presentation, there are lessons to be learned. I wince when I think back at some of my very first pitches. The slides were poorly organized, I stumbled through my words, and the business model was practically incomprehensible. It is no wonder so many investors turned me down in the early days. But after nearly every meeting, I opened up this laptop, and performed a brain dump of all the lessons I learned in that pitch. Where had I connected with the investor? Which parts piqued her interest? Why did I get the ‘confused puppy’ look during the monetization slide?

After every few pitches, I would tweak slides to make them clearer. Then, we would bring the team together and form a fake VC meeting, where everyone was allowed to interrupt me, grill me on specific details of my pitch, and generally force me to hit as many curveballs as possible. Afterwards, I still continued to face rejections, but now they were a little less common.

At the end of the day, that’s the lesson. Fundraising is hard. You’re asking someone to give you thousands or millions of dollars to spend on an extremely high-risk venture in an industry where most investors lose money. Treat fundraising season like you do the rest of your business, with extreme energy and passion, and you’ll survive the rash of rejections just long enough to put money in the bank.