Fundraising is the most significant and challenging step in any start-up’s journey. It is a reality for most, if not all start-ups, to hear the word “no” frequently. 

However, it is crucial to understand that the refusal does not signify the end of a business journey. To comprehend the message conveyed by a potential investor behind the word “no” is the door to a world full of “yes”.  

Raising funds for a start-up is a challenging task, and it’s common to face rejection. The resilience to keep moving forward despite this rejection is one of the foremost qualities required to succeed. Ultimately, it is essential to understand that not all investors can comprehend your idea, no matter how great. Expecting everyone to be enthusiastic or interested in your proposal is unrealistic. 

Keep in mind that investors always have personal interests and areas of expertise. Therefore, it is essential for you to choose the right ones, and being rejected by an investor could indicate that they might just not a good fit for you. It is vital to have an investor who understands your industry and market space and shares your vision. Bear in mind that if you secure investment, you will be working with them for the long haul, so choose wisely, as you will be “stuck” with your investor for quite some time. 

Understanding the reason behind the word 

Even if you have completed your homework in advance by researching your potential investors, the chances of a successful pitch are still primarily limited. It requires skills, practice, and the ability to demonstrate a deep understanding of your business and its potential to present a compelling pitch to potential investors. You need to engage your audience in an easily understandable manner.  

An investor rejecting your proposal does not necessarily mean your business idea is bad or wrong. It could simply mean you have failed to communicate your vision and what you are offering to the investor. 

The key challenge for founders and entrepreneurs is to receive a rejection promptly and capitalize on the opportunity to ask open-ended questions, obtain, and absorb feedback, learn and understand why and, if necessary, adapt the proposition. 

It’s getting complicated 

Entrepreneurs often must deal with the complex decision-making process of funders. Sometimes, factors outside of one’s control come into play. For instance, investors may be hesitant to miss out on the “next big thing”. As a result, they constantly monitor and revisit your idea without investing. Another factor that may come into play is that investors often have an existing portfolio of investments or a planned pipeline. This may cause a conflict of interest or reduce their willingness to invest in a similar project, even if your idea is exceptional. Liquidity constraints and a lack of smoothness in deal flow are also potential reasons that may lead an investor to say no. It is important to note that this is not a reflection of the validity of your idea but rather a personal calculation that every investor must make. 

One should never underestimate the significance of numerical data and evidence-based facts, as they constitute an essential part of any proposition and have a tremendous impact on investors’ decision-making process. However, sometimes investors find themselves inclined towards the intangible aspects of a proposition, which cannot be quantified in numbers and are more abstract than a data sheet or a PowerPoint presentation.  

Investors are drawn to the way a team works together, how they communicate with each other and the investor, the knowledge, insight, passion, and understanding they possess that makes them stand out from the rest. The conviction and credibility with which they present themselves also play a crucial role. While investors look for quantifiable growth and other tangible indicators, it is the overall feel of the team and their ability to deliver what they are proposing that ultimately determines an investor’s decision. 

When one window shuts, another opens 

The financing options available to start-ups have increased significantly in recent times. From angel investors, grants, and peer-to-peer finance to venture capitalists and crowdfunding, it is essential to understand what is available and what works best for your business. Being aware of what investors are looking for is critical to future success. You must be able to clearly explain why your target market needs or wants what you are offering. This will provide the necessary insight to determine if and how your business can grow. 

The Access to Finance team provides fully-funded bespoke finance support for eligible businesses with no fees, commissions or introduction costs. Small to medium-sized businesses in Greater Manchester that have identified a need to raise finance and require assistance with this process, please apply for our service through the below link.