Terence S. Phillips,
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One of the worst parts of fundraising is a lack of positive feedback from potential investors. If you add in the silent treatment, things couldn't get much worse. Here is how to deal with it.
One of the worst parts of fundraising is a lack of feedback from potential investors. Fundraising is hard, and as I've said before, closing your raise is even harder. If you add in the silent treatment, things couldn't get much worse. Potential investors drag their feet. They hate saying "no" so they try to say "no" gently. Or they say nothing. And entrepreneurs hate that.
Here is how to deal with it.
When You Get a "No"
Investors who say "no" should actually be rewarded. That may not feel natural initially, but try to recognize that they're trying to help you. They're being honest and direct in a hard situation and haven't left you and your company in limbo. A "no" allows you to move on. You should thank them.
In Airbnb's earliest stages, it sold boxes of "Obama O's," generic Cheerios with an illustration of Obama on them, during conventions for $40 per box to fund its business. Today an "Obama O's" box sits in the office of Union Square Ventures, a top venture capital firm, as a subtle reminder of what they missed. If Airbnb's story tell us anything, it's that even the best get turned down.
In the event of a "no," be polite, thank the investor for their time and direct response, then inquire if they're open to providing feedback on why they declined or what they'd need to see to change their mind. If they seem open to staying in touch, this will help you narrow your search in future rounds and help you convert investors that are the right fit. Getting constructive feedback can also help you decide whether the terms you presented are fair and possibly guide you toward improved terms.
When You Get No Response
The unfortunate truth is that the vast majority of investors don't respond to pitches.
But when there is no response, that should tell savvy entrepreneurs something. Maybe you don't want to admit it to yourself, but if investors aren't responding, they're probably not interested. Don't chase them.
Instead, here's what you should do:
Keep in mind, the odds are stacked against almost all young companies. When I talk to future capital seekers, I remind them that: "For every 100 investors you talk to at the early stage, you can expect to hear 'no' or nothing at all from 95-98. It's what the entrepreneur does with the 'no' or silence that often determines the outcome."
Like Airbnb, the overwhelming majority of VCs passed on Uber in its seed round. There was so little interest initially that Uber was giving "VIP Service" for life to investors willing to put in more than $10,000. The lesson? "No" and silence are just part of the fundraising process. But they are not reasons to give up. Instead, these responses--or lack of responses--should remind you to stay focused and realistic. You have work to do.
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