Dealing with Rejection by Investors 3

You’ve developed a plan and submitted it to investors. You’re comfortable with the plan and the submissions process. Several investors have declined. Now what?

The investment process works as a filter, sorting business plans, pushing some to the top and others out of the way. This filtering process is a good thing for many entrepreneurs who have the sense to listen to it. If the investment community doesn’t invest in a plan, there may well be some very good reasons why not. Sure, there are exceptions, people who made their own way despite rejections and hit it big. However, there are a lot more cases of people who didn’t listen to investors and pushed their plan anyhow, borrowing too much money, investing funds of friends and family, and ending up in failure. Think it over:

1. Try to identify the reasons for rejection. One rejection means nothing, but a collection of rejections is significant:

  • You may not be getting good feedback. Investors have no legal obligation to tell you the truth.
  • Is your team as good as you say? Do the investors agree?
  • Are your assumptions believable? Are investors not believing the huge growth rate and return you have in your plan?
  • Are you taking too much, or asking too much?

2. Think about this business idea. The investor community reviewed your plan and doesn’t want to invest. Maybe this isn’t such a great business plan, or even such a great business.

3. Maybe they’re doing you a favor. Take the investment community as a group of well-trained professionals, and then reflect on your rejections. If all of these people chose not to invest in your plan, maybe it isn’t such a great idea after all. Maybe you should completely revise your plan. Or, stick to your day job.

4. Don’t insist on failing. You have a series of experts sending you a warning. Listen to that warning. They aren’t all that stupid.

About the Author Tim Berry is the founder and chairman of Palo Alto Software and Follow him on Twitter @Timberry. Follow Tim on Google+ Read more »

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  • Chekwube

    I want to borrow some money from a bank to start a business. Do I need to give them a summary of my business idea? Again, I don’t have a collateral security to obtain the loan. But I hope to pay back by monthly installments of about 5% of the total sum to be borrowed. How can I convince them to lend me the money? Thanks for your immediate reply.

  • Internet

    I’ve never given this a try, but I think it’s about time I do.

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  • Howard Petlack

    Dear Tim,

    At this stage we have a business plan (executive summary) that has received positive commentary from various offices in the state of New Jersey. One possibility is obtain state money, another is to find venture or angel funding. My question is exactly where do we locate these people to present out proposal? If your web site posts sites and/or names to approach, I must have zoomed by it.

    The business we plan to start is a nationwide moving company with a twist that would be disruptive to the current industry. Even during poor economic times, the amount of people moving hasn’t changed. My partner grew up in the moving industry working for his uncle and father and has owned his own local courier business.

    Any information or advice would be most appreciated.



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