What to Do After a Venture Capitalist Rejects Your Business Plan
Starting a business is a matter of heart. Sure, there are plenty of tangible items to check off your startup to do list but at the core is an idea – your idea – and what you believe it will bring to the world.
Perhaps that’s why a rejection from a venture capitalist can feel so defeating. As much faith as you have in your business plan, it stings when someone else isn’t as enthusiastic. When you add in the financial cost of a rejection of your business plan by a VC, it is a tough entrepreneurial pill to swallow.
The good news is that a VC funding denial isn’t the end of the road. You can still land funding for your startup – here are a few things to try:
Try to see look at the rejection as an opportunity and not a loss. Chances are the word “no” wasn’t the only one the VC said when handing your business plan back to you. What else did he or she tell you? What about your plan made him or her doubt it? Why was he or she unwilling to invest on the spot? There is a reason that venture capitalists are the ones holding the purse strings; they know a thing or two about the business world and what parts make up a smart investment. Of course no individual can definitively predict the success or failure of a business idea, but if you pay attention to what the VC said during your pitch you may glean some valuable information on which direction you should take next.
Once you’ve received VC feedback, even in the form of rejection, apply it to your business strategy. Are there parts of your business that are unusually risky? Decide where you are willing to compromise and tweak your business plan to make it more investor-friendly. You can always add in some of your more progressive (read: risky) business ideas once you start bringing in some revenue. While 5- and 10-year plans are valuable, it’s okay to focus on your immediate needs in order to get funded. Edit your business plan until it is the best laid one for VC acceptance.
Understand that though investment from a VC is an awesome boost to a startup, it isn’t the only route to funding. There are plenty of other sources of business funding that may better fit the bill. A few include:
- There are a lot of everyday investors out there who want to be part of the next big thing. When you put your business idea, particularly something is a consumer-facing product, on a crowdfunding site you open up your pool of pocketbooks. Your ability to then share those projects on social media platforms improves your chances of success, too. The investments are much smaller of course and it can take longer to raise the money you need than an immediate “yes” from a VC. You retain control of your business though and your ideas. Keep in mind that crowdfunding sites usually charge between 3 and 5 percent of the total raised.
- Online lending platforms. Instead of focusing on a single VC, why not put your business idea in front of hundreds of investors and lenders? These platforms usually allow you to upload your business finance request once and then connect you with potential investors and lenders. The fees for these sites vary but save you a lot in time and effort.
- Government business loans. Handled through the Small Business Administration, these loans require applicants to maintain a credit score of 660 or above. Your business must operate for profit, have at least one location in the United States, operate mainly in the U.S., be independently owned, and not have access to other types of financing. There are six different types of SBA loans so it’s worth checking to see if your business is a fit.
- Business credit cards. The long-held belief that credit cards are not smart business moves is starting to fade. In some instances, a business credit card can be the smartest move. If you need a relatively small amount of startup cash and expect to make it back within 6 months to a year, then the interest rates associated with a business credit card won’t cost you much more than other lending routes. You also maintain complete control of your company by going this route.
Remember that a single (or multiple) venture capitalist rejections does not mean you have to say good-bye to your business idea. By tweaking your ask and looking into other routes for funding, you will eventually get the “yes” you need to make your business dream a reality.