How To Recover After Getting Rejected By VC Funding
Getting turned down for any startup can be disappointing at first. But in the long run, it can benefit you be re-accessing your business model and making changes that will take your business to the next level.
Raising money for your startup is really hard and usually takes much longer than expected. This is why spending a great deal of time perfecting your business plan is a fundamental part of trying to raise funding for your business. But sometimes, no matter how hard you try, not all VCs will be captivated by your business especially if it lacks some of the criteria that investors are looking for.
What a lot of startups fail to realize is that venture capitalist is actually trained to say “no“ and that unless your business plan is the kind that can guarantee fast growth and therefore make a profit in the interest of the investor, then VCs are sure to reject you. One of the reasons for this is because there are limited investments that VCs can make, so they are coached to look for reasons to withhold funding if they don’t come across a business that is mind-blowing.
These challenges are not insuperable, though there are some things that startups can learn from being rejected by VCs and angel investors. Here’s a guide to overcoming setbacks and using it as nourishment to push you forward.
Venture capitalists and angel capitalists are often respectful individuals and are always willing to offer advice that will help you improve on your business idea. So it is in your best interest to ask investors how you can improve and why they rejected your idea. The reasons that they give you is important as this will help you avoid making the same mistakes next time around. But its also important not just to ask the VCs for feedback but also to get feedback from your networks so the areas that need to be improved are clear.
Re-visit Your Business Model
When it comes to your business model, investors are looking to sponsor startups that have the potential to make lots of money and most CEOs are well aware their target markets and understand the needs of their consumers. But getting rejected by investors shines a red light on your business plan, and forces CEOs to go back to the drawing board and make the necessary changes.
Take A Deeper Look At Your Market
Sometimes investors may think that your target market is too narrow. Other times they may think that you are targeting a market that is too broad. When it comes to your target market, investors want to support companies that will address a potentially large and rapidly growing market. This means, clearly defining your financial projects from the most important to the least important.
Your Financial Plan Needs To Make Sense
Your financial plan is vital and investors are interested in seeing the kind of numbers that will indicate that your business is going to grow quickly. In addition, investors want to see if there is a window of opportunity which they can make a profit. But above all, your financial budget should be for the benefit of your company. To avoid possible rejection from investors, make sure your financial plan makes sense and is reasonable.
Approach Other Investors
Just because one investor refuses to sponsor your business, doesn’t mean that it’s the end of the world. Seek multiple advice from high profile business people about your business and keep pitching to different investors for funding. Also draw up a target list with all the investors you would like to approach and take it from there. You want investors who can buy it your vision. But your vision needs to be well detailed since they’ll understand the dynamics of your industry or technology better than most.
Hearing the word “no” is never easy to digest for any startup especially if you have a vision that you desperately want to bring to light with the right funding. However, when you get rejected by investors, you need to always ask yourself what you can do better to make progress on your business proposal so that when you go back to investors, there is a distinct improvement and also room for growth which are what investors are looking for all the time.