My Favourite Five Rejection Lines from Investors

There are five common rejection lines that you usually hear from investors.

Contributed by BL

Let’s go back to the topic of fundraising. If you are one of those people working in sponsorship, you will learn some notable patterns of how the sponsors would behave. Similarly, investors are a very similar breed of people. If you are an entrepreneur and have done an adequate amount of fundraising, you would encounter different well-crafted and elegant rejection lines from the investors. So, I have decided to compile some of them based on my experience here that might give you some indication when you start hearing the following lines:

Rejection Line 1: I am busy at the moment

Of course, everyone is busy. Here is the rule of thumb to know whether the investor is really interested. The analogy is the same when you try to date a girl. How do you know that the girl is not interested? If she snubbed you for more than three times, my advice to you is to forget it. It is the same with the investors. If you cannot get his attention for more than an hour to fund your startup, you should start looking for other people who are interested in your business from the horizon.

Here’s my other advice to people who want to have famous investors to fund their business. You have to remember that since they are famous, they would not have time for you. They would have millions of deals to close, but if they are seriously interested in your business, you should be able to get the meeting by the third time. I remember a case where I was trying hard to pitch to this business angel in Cambridge who specializes in biotech. The problem with the investor is that he was opinionated and if he was not interested in your ideas, he would keep telling you that he would get back to you. Of course, you can look at his reply in two ways. He does not want the bridge to be broken if you have the killer application. The other side is that if he does not have faith on the idea in the first place, it is likely that he possess the potential to screw up your business as an investor.

Rejection Line 2: I have a lot of deals to close

Yes, the second rejection line is similar in character with the first, but you have to bear in mind a few things. First do not take that as a rejection in the first round. Apply the approach of dating a girl to the same scenario. The important thing is to do your homework. What do I mean by that? It is important that you find out whether the investor is closing an important deal. As closing the deal is one of the hardest thing to do, you have to work out whether the investor is doing a big deal at the moment and have no time to tend to you.

Rejection Line 3: What’s there to stop the others from copying you?

It is an important question to ask yourself first. However, if you are sure that you have done your market research accurately and work out exactly how you can overcome the barrier of entry, you should move with it. Sometimes, the investor use this question to bluff his way out. That’s his exit strategy. If you have no answer to that question, he will most likely follow up with the reply, “Since it is so easy to copy your business idea, I should not even bother to invest in you then.”

Actually, this is not a bad rejection line, because it keeps you in check and makes you aware of your competitors and the risk you have to take to cover your venture.

Rejection Line 4: I don’t understand/understand your technology

It goes both ways. Some investors just don’t want to invest in you, and despite that they may have a PhD in biology, they will claim ignorance and say that they don’t understand your technology. If you work on biotechnology, information technology and nanotechnology, you see it all the time. Of course, there is the other extreme where the investor claims to understand your technology but ended up giving you the wrong business model to get your startup into the point of no return. My advice is that you should do due diligence on every investor you are meeting. If you go to a venture capitalist, you should find out the portfolio of companies that this venture capitalist tend to invest in. The reason is that if the portfolio of your startup does not match with theirs, it is not likely that they will invest in you.

Feigning ignorance is the way for the investor to get himself out of the situation. You have to counter the situation by framing your questions to make him understand your technology. Remember the rule, you are selling a solution to a problem. The same applies to an investor.

Rejection Line 5: It takes eight weeks to close a deal

The standard reply from seasoned serial entrepreneurs to this line, “Yeah right.”. If you are working with a venture capitalist, it takes at least half a year (which is already the fastest time) to do that. Business angels can make it shorter than that, maybe about three months. If you are trying for government grants, it can stretch it to a year. So, you must always have a plan B on your hand, in case the funding situation gets stalled. That is where bootstrapping comes in.

So, with these five rejection lines, you should be careful in talking to your investor, particularly venture capitalists and business angels. There are situations where the investors are delaying you and set up the business which encodes your idea. Of course, in technopreneurship, it is usually rare because they don’t possess the intellectual know-how to do that. Still, I do urge caution to whoever you speak and make sure that you have done all that you can to solve the problem.

Technocrati Tags:
Business Angels, Venture Capitalists, Investors, Singapore Entrepreneurs, Start-Ups, Business, Singapore, Entrepreneurship, Private Equity, Technopreneurs

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