What Not To Do…4 Things Entrepreneurs Do To Get A ‘No’

Investors pass on the majority of deals that come across their desk. As an entrepreneur, you are going to get many more no’s than checks. There is not a magic checklist that says do these things and you will get all the capital that you need. But, there are a few things that you can do that make it easy for an investor to say no. Yemi Keri, the Co-Founder of Rising Tide Africa, an women’s angel group, shares the 4 things entrepreneurs can do to make it easy to say no!

Refusing to share data

You’ve exchanged some emails with an investor. They have demoed your app. You meet in person for a pitch and it seems to go well. Then they ask to see your numbers…

If you’ve listened to podcasts like “The Pitch” or have watched “Shark Tank”, you may have heard entrepreneurs block questions that ask for these details. That’s because they do not want those details broadcast globally. And even in that case, it typically doesn’t turn out well for the entrepreneur. 

In a normal pitch, you can (and should) share high-level numbers with investors. Especially if it is not your first conversation with the investors. These numbers can include total revenue, monthly growth rate, and cost of customer acquisition. If you don’t know these numbers, you are not ready to take investment.

But what if the problem is not that you don’t know the numbers? “If you don’t want to tell me, you are wasting my time,” says Keri.

Starting a business “just because”

As entrepreneurship becomes a more popular career path, investors are seeing more entrepreneurs starting businesses because it seems cool. They tend to start copycat businesses because they are motivated by being an entrepreneur and not by solving a problem. 

Keri says she can see through these types of entrepreneurs because “There is no depth in the value proposition.” When the going gets tough, these entrepreneurs quit. And since we know that the one thing that is true for all entrepreneurs is that things will get difficult, investors know not to waste their money on these types of entrepreneurs. 

To demonstrate passion in your pitch, share a personal story about how you uncovered the problem that you are solving and why it is so important to you to fix it for your customers. 

Not caring about profits

Gone are the days of building a business in which profitability plays second fiddle to growth. If you have no path to profitability or require massive market share to reach profitability, angel investors will pass on your business. Globally, we’ve seen market corrections from companies like WeWork that lost $219,000 every minute over the summer. In Africa, we’ve watched Jumia close down unprofitable markets like Cameroon and Andela scrap its junior developer program in pursuit of a sustainable business model. 

Before you pitch to investors, realistically model your revenue and expenses over several time periods and multiple scenarios. Does it cost you more than $1 to earn $1? Will it forever? If so, you will need to rethink your business model. An entrepreneur herself, Keri says, “I can see through the numbers. I am able to use my own growth experience in doing due diligence. I can see if a business will grow in the long run and see if the business is going to be sustainable.”

Refusing to coach

“You have to be humble to succeed in this environment,” said Keri. Angel investors, like those from Rising Tide Africa, believe that mentorship and coaching are critical to the success of entrepreneurs. If someone will not take advice or consider input from other entrepreneurs and investors, this is a big red flag. Take a scenario where your business model is unsustainable. If you are coachable you can actually fix your model with the help of your investors. If you are not coachable, nothing will save you.

You can demonstrate being coachable in a pitch session by politely considering feedback that you get from the investors. It’s important to not get defensive, even if you think the feedback has no basis in reality. 

If you don’t want an automatic no from investors, follow these rules. Nothing can guarantee investment in your company, but if you are coachable, transparent, and passionate about solving a real problem through a model that makes profits, your odds are good.