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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