Step 5: How to Turn Rejection Into Insight

hey there my name is Kelly Nyland I'm the founder and CEO at Whym a software company this is my fundraising series for you so uh today we're going to talk about indicators of interest and how we can make rejection productive so rejection is a natural part of the investment process and we're going to talk a little bit about uh what we can do to either identify it avoid it or if it does happen to us what can we do to make it more productive so momentum in the process is really important we talked about that in the video around the affordable emails and following up

with your investors to remind them why they really like you and what running your process so that they know what the next step is where they can learn more about you your story and your plan to build a billion doll business so I created a little slide on decoding the rejection messages that you probably will hear from investors so hopefully the video we did on qualifying your investors will help you to avoid some of these messages particularly those around two early or too late so if you re if you go back and review how we qualified our investors we made sure that they were stage

appropriate writing the size checks for the size round that we were looking for and also making sure that they invest at our industry or sector I'm planning to do another video series on competition but in general you should also look up any direct competitors in that you know that you have in the market and become very aware of who they are how how adjacent their features are or competitive uh their features are to your technology and then make sure that you don't reach out to that set of investors because they may not be able to tell you they may be looking at other competitors and

those are sometimes things that you can't you can't know but having a competitor in the portfolio with a competitive feature set or a competitive feature set on the road map um is another great way to get rejected and it's going to feel like rejection to you but it's really just going to be a matter of that investor simply can't invest in you so hopefully the qualification process will help you to avoid some of the more standard uh you know check boxing rejection notices that you shouldn't get and um and then we'll talk about the the others so can't get conviction uh is relatively related to

if it's one decision maker um that's very straightforward if there are more decision makers within the partner group for the folks that are investing in you they all have to kind of come to a general consensus and so it you can read articles out there about the investment process um but sometimes getting conviction is not really necessarily just about your champion in the group but that Champion's ability depending on how junior or senior they are uh within the group to help create conviction um so if you do find a champion within that group you know it really uh it really makes sense to spend more

time with them making sure that they're fully equipped with all of the all of the resources that they need to make a compelling uh pitch within their partner group about your your business uh not a fit is just um straightforward this can be more of a you know just kind of not a fit or have decided that it's not a fit um for the thesis uh of the of the the investment um sometimes this is very straightforward if you haven't done your diligence and they just don't invest at your sector or your industry um and other times uh they've just identified that maybe they don't

get it right or it's not something that really makes sense and therefore it's just it's not a fit for uh the the themes that they've put together for their year in terms of how they're going to invest and things that you might not hear uh that I've noticed I spent a lot of time with Founders around their cap table especially early cap tables because a lot of early Founders and I'll most likely do a miniseries or at least another video on this but really understanding your how to assemble your cap table and how to set the right valuation and and what those numbers really mean

when you start talking about them to investors is a critical part of your negotiation and usually within the first call to two calls or or directly after the first call both parties both you and the investors should want to understand is the size of the round and is the size of the check appropriate for you to continue to have the conversations moving forward so won't dive too much deeper into that but cap table setup and the the sale of your early Equity um and valuation are all great ways to sort of maybe not get in the zone where your VCS uh or Angels maybe the

size of check that they want to write or the size of check for the percentage of the company that they want to write is not really in Target so knowing how to ask those questions on at the end of the very first call or definitely on the second call will help you get a better understanding of whether this investor is even qualified for you to uh for you to continue to talk to um and then other things like that sometimes they're just things that you can't control in terms of bad timing or busy with other deals something is distracting them and they sort of forgot

after the 20 companies that they've talked to since they talked to you um that there's something else that is more interesting or more aligned with their thesis and the firms or team's goals okay so now that we've talked to through decoding these messages um just a quick reminder here that first and foremost there are so many investors for you to look at there's over 200,000 listed on crunch base and so as you start to get through your list you can always refine your list and uh continue to uh filter down your list based on what you're learning from investors the size of your round and

the education that you're getting along the way I also wanted to just point out here that on my investment board uh I keep four different columns for anyone that I don't think is a right fit in the pre-qualification period or anything that I learn about the investor along the way so usually am I not pursuing right now this could be this could be either um folks I've talked to that it just doesn't seem like the right timing um for them maybe there is a competitor in the portfolio or a potentially competitive feature um so I'll just kind of avoid them maybe for that round or

for that particular six months until the market uh you know shifts a little bit um no one abandoned obviously I'll just show you through here I mean there's you can see like I've I've probably talked to somewhere between 7 to 800 investors um maybe around 700 I think is the total count that I have today and we have more than 60 on our cap table so you know you have to talk to a lot of people you have to get that kind of feedback and for every piece of feedback that I get I record the communication around why I didn't get that deal and then

I drop all that into a document and I put all of that in a wordcloud and I kind of sort out for the things that I know are just maybe layup responses too early too late I don't look at those keywords but I sort of look at everything else and I try to determine what are these themes that I can um start to understand and learn about how to get the more important information upfront in my pitch and to leave some of the FAQs and the learning in the back half of the process um and so I think that's a great way to especially taking

early rejection like if you're getting rejection in the first after the first call or if you're getting rejection via emails before you even get on a phone call um really kind of collecting up that information and trying to find out why will help you move down the funnel into the second and third calls uh a lot lot faster so don't forget that by the Numbers this is all just a really a numbers game about improving your process about learning as you can iterating quickly um and keeping track and looking for Trends in your process so that's going to conclude uh this video for today again

if you are enjoying this series um please reach out to me for additional questions that you have that you want to get answered or need resources for and also please share this with another founder who's either building a company thinking about raising or currently raising and need some additional best practices to help create M more momentum in their fundraising process thanks again