“No, I Will Not Fund Your Company”

11/11/10

If you are an entrepreneur and you haven’t heard the phrase above, then you probably got one of the following: “why don’t you come back when you have more traction;” “this just isn’t for us;” or (my least favorite), “this looks like a solid double…we only take home runs.”

I do some work for LaunchCapital, a seed stage venture fund headquartered in Cambridge, MA, and have had to break the news to some entrepreneurs. It is not easy to say “no,” and it can be even more difficult to give candid feedback. After all, you risk sounding arrogant and it can invite unwanted debate from an entrepreneur who is (understandably) passionate about his or her company.

I have also had the opportunity to work with several early stage ventures to help with fundraising. When I start working with a company, I state the obvious: “the only certainty ahead is rejection.” The danger is that a) you will get dejected and quit or b) you will miss key opportunities to pick up value during the fundraising process. Below are some suggestions to avoid these pitfalls.

Stay Positive

Every day you read sites like Xconomy.com that run stories like this: an alternative energy firm (not yours) raised $8M from a big name VC (who wouldn’t take your call), to pursue the market opportunity that you identified (almost a year ago now). Yet, you never read about the hundreds of companies that do not get funded or that raise less than they want to. According to the Entrepreneur’s Census (www.bit.ly/entrecensus), a not-for-profit study that I founded last year, 70 percent of respondents raised less funding than hoped. In the face of long odds and many rejections, it is vital to remain upbeat. Here are some suggestions:

  • Team up: find another entrepreneur who is in the process of raising capital. Share war stories and information about investors. Make introductions for one another. Lend an ear.
  • Measure progress in a form other than dollars raised. Create a simple model where you can mark progress on each potential investor from introduction, to first meeting, second meeting, due diligence, to funding. Seeing things move on the scoreboard will help.
  • Make yourself accountable to someone you admire. Get a mentor and schedule regular calls. It’s always harder to give in when you have to admit as much to someone you respect.
  • Set goals and write them down. Beyond just a fundraising goal, write down how many investors you want to meet each week.

Understand why you got rejected

With a game plan and a support mechanism in place, it will be much easier to positively process rejection. You may be relieved to find out … Next Page »

Matt Shapiro is the Author and Founder of the Entrepreneur’s Census (www.bit.ly/entrecensus) and the Chief Executive Officer of Tooble, a new educational software venture. Contact: matt.shapiro@yale.edu. Follow: @entrecensus Follow @

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