Being Turned Down For Funding – Two Perspectives

By April 14, 2014


A startup I’m working with on the side was cut from a popular local business plan competition. I’m not going to lie; it kind of sucked. Our team put a lot of work into our application, and we didn’t have much of anything to show for our efforts. But our situation was not unique. Everyday, startups get told no from VCs, grantors, angels, accelerators, etc.

“We’re sorry, but we will not be funding your company at this time.”

It would have been easy for us to get upset. To grieve. To complain. To blame the judges. To say things like, “You simply don’t understand our business/sector/value prop.”

But, what good does that do? Does it help the investor? Does it make them want to fund you? We’re not investing because we don’t understand what you’re doing? It’s a bold statement to make, and one that is poorly received by the folks writing the checks.

But instead, we held our heads high and used this setback to refocus the team and concentrate on other projects. There was a silver lining to it all, and it took a few days for us to realize it.

This is how professionals manage rejection. They deal with it and move on. It’s what responsible, mature, sensible founders do. If you’re a founder and you have issues with rejection, well, you’re in for a rude awakening.

matt-darthvaderAs some of you know, my day job involves being on the other side (some might say the ‘Dark Side’ of the startup world), finding and vetting good companies to invest in. It’s a job that involves doling out a fair amount of rejection. I make a lot of those, “We’re sorry, thank you for your application” type of emails and phone calls. It’s not easy, and I’ve gotten more used to it over time.

Most of the time, people are disappointed, but thank you for the opportunity. Some will ask for feedback. But there are a few, a select few, that decide to take it out on you. I’ve had to deal with a handful of these situations working for my current and former accelerator.

More recently, the founder suggested that we passed on their opportunity because we didn’t understand the business. That they didn’t have enough space or room to fully discuss their recent traction. They even had the guts to suggest that, even after the type of passive-aggressive email this was, that we could still reach out if we were interested in investing. Thanks, but no thanks.

The lesson in all of this is three-fold:

1. Don’t burn bridges with a potential investor. You never know who they are connected to and, who knows, you might still find your way back into their pipeline sooner than you think. Leaving a bad conversation like this with any funder isn’t likely going to end well.

2. Don’t blame other people for not understanding your business. Take it as an opportunity to retell your story. To frame it in a different way. To communicate it more effectively. Simplify, simplify, simplify.

3. Thank them for the opportunity and keep them engaged. You can tell a lot about a founder by how they deal with rejection. Thank them. Ask for feedback. Keep them updated (monthly updates about traction, news articles, strategic partners, etc). Hold your head high and move on.

So, think twice about sending that snarky email to the group that didn’t fund your startup. It just might turn into a blog post.