Raising funds? Ask for no and then 3 more

Reverse psychology can be powerful. Be kind when friends stuff up and they’ll be  shamed into doing better next time. Tell a family member “I’m fine!” through gritted teeth when clearing up and they’ll be honour bound to help.

And so it goes with early stage (seed) capital raisings for startups.  The best advice I was given when pitching my fledgling tech business to potential angel investors was “try to get them to say no.”

This works beautifully on so many levels.

Firstly, if they absolutely can’t say no, then they’re probably going to be a yes. If they’re vascillating, telling them a no is fine will let them off the hook.

Counter intuitively, if you tell a potential investor they don’t have to invest, they may be more interested in doing so. (‘I don’t want to miss out..’). It’s a classic closing move. It’s also a bit like putting someone on silence. They have a sudden urge to speak.

But you don’t want someone investing who is not that keen on investing. They will become a millstone around your neck.

What you want to do is to cut off the time wasters as quickly and diplomatically as you can. The “maybes” will suck the lifeblood out of you. They’ll say they need to talk to their partner, or think about it more, or … any number of reasons.

Ring me next week and we’ll chat” is not a “maybe”. It’s someone who is too weak or shy to say ‘no’ to your face and will give you the run around. What’s another week got to do with the price of fish in Denmark? Nothing.

Stop all this upfront. “It’s OK to say ‘no’, really. In fact I am happy with a clear cut no.”

When you get the no, do one more critical thing.

Say something like: “Thanks for your time today listening to my idea. Now you know what we’re doing, can you please give me 2 or 3 other people who you think might be interested in hearing about this opportunity?

You see, a “no” is totally fine. In fact, it eases the tension, and the angel investor will be almost honour bound to help introduce you to more people. It’s their quid pro quo for saying no.

While this no shuts one door, it should lead you to 3 more. The ‘no’ is just a paving stone along the road to funding your business. The more the merrier. It’s fine. 1 pitch becomes 3, 3 becomes 9, 9 becomes 27 and so on…. you’ll find your money along that road.

Back in 1999, I remember showing our idea to one high net worth individual down town. He listened respectfully to our 10-minute pitch. We then closed our laptop, looked at him and he simply said “No, this is not for me, but thank you for showing me your idea.”  I have seen him at various events these past 18 or so years and he is always smiling. He is as respectful, positive and friendly as ever. He passed me on the street the other day, stopped to chat and said how he knew I would do good things in my new role. This was someone who utterly rejected the investment opportunity I showed him and it is totally fine. A relationship (and perhaps mutual respect) was formed.

No’s are not to be taken personally. Encourage them. Use them. Don’t waste time with maybes. Get through the no’s and the yeses will be not far away. Because the yeses are always connected, somehow, to the no’s.

Picture Source: http://silicon-valley.wikia.com/wiki/Optimal_Tip-to-Tip_Efficiency

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4 thoughts on “Raising funds? Ask for no and then 3 more

  1. Great post, as always Charlie. I recall a podcast about how a famous startup founder (that I can’t recall at the moment) had a slide(s) that focussed on why the investor should NOT invest in the startup, right up front. What was the result of that? Most of the investors were impressed with his honesty and came back with reason why they weren’t insurmountable problems, ways around the issues, ways they could assist etc. Bingo!

  2. A maybe can truly be a maybe and worth pursuing with updates on how you are going month to month and a longer getting to know you period
    Creating a window for a No might prevent someone from properly getting to know you and your opportunity
    A previous hard No can become a hard yes from seeing your progress

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