How To Say No to Big Money

and Not Regret It

As we began fundraising for a Series A in early 2015, a mentor wisely reminded me that each pitch is a lesson.

A year and a quarter later — and 250 pitches wiser — we decided not to take on investors.

We went back to bootstrapping.

And before we get all “the pitch or the pitcher/s, must be terrible,” please allow for some additional context.

We had enough funds committed, twice. More important than the money was choosing our investment partners wisely. All money is not good money. “Be thoughtful about from whom you raise capital” were wise words from a recent article about changes in the VC capital funding landscape.

Our investors faced significant restrictions and barriers to entry. Our biotech company works with a federally illegal plant material. Our investors needed to not only meet the usual federal requirements mandated by the SEC for participation in any securities raise but also had to be state residents (no flying to the valley or east coast for dollars), agree to the state requirements including a complete background check, fingerprinting, and provide proof of the source of the investment funds. Oh, and their spouse had to agree to the background checking, too.

Even given those challenges, we successfully raised a seed round in 2014 and began the journey to our Series A with a world-class leadership team, model, traction and effervescent entrepreneurial enthusiasm. We have an incredible small cohort of angel investors behind us, who believe in our idea, model, timing, and want the company to succeed.

So why did we go back to bootstrapping after 250 pitches?

We ‘just said no’.

During that time, averaging four plus pitches per week, taught me and our team a huge lesson: how to take a No.

Out of the 250 pitches, we heard ‘no’ 244 times.

Being data nerds, we wanted to know why. So we did some analysis and found some interesting insights:

• Over 90% of our pitches were to men, even with a concerted effort to target women funders
• All the ‘no: ethical’ were parents
• The ‘no: invested’ (meaning they were legally unable to invest in our operation due to state rules) let us pitch before telling us they couldn’t invest — even when pre-screened directly about their eligibility to invest
• The majority of the ‘no: other’ are investing in our industry outside of the state, and will invest in state when the legal framework allows

We understand that we operate in a risky regulatory area (huge understatement), and that we are pioneers. So the majority of ‘no: too early’ were not a surprise. They are now primed for future conversations, aka future yes’s.

We began 2015 by pitching investors familiar with our industry, moved to tech and biotech investors, high wealth individuals, industry speculators, serial entrepreneurs. We pitched to those who claim to only invest in women founded or led companies. We pitched to every startup group and angel soirée and person who checked the appropriate boxes on the most trafficked funding sites. We pitched a potential investor who had accidentally checked the right box on their investor profile.

We learned some hard lessons, like when to play our ‘man card’, and how to graciously say no to pirates.

We pitched VC’s for sport, wagering among the team which investment bro would break it to us that they couldn’t invest “due to their bylaws,” when we knew they had no intention of participating in our round.

We received some great advice — from positioning to presenting to closing.

We received some less-than-great advice, which made us more resolved to be on the right strategic path.

We worked well as a team, we evolved our pitch strategy with each meeting. We gained fans along the way, smart, interested makers of things and businesses, rooting for our success.

We are not a traditional company, likely we will not find traditional investors. All of our early seed investors are women, in a funding environment where statistically less than 5% of VC goes to companies with a female CEO.

In our 250 pitches, we found enough money to move forward. What we did not find were true partners who believed in our values and our combined success more than they believed in their entitlement to our equity. The conversation where we had to say “No, thank you” to 80% of our Series A funding, because our investors wanted triple the agreed upon terms, at closing, is still fresh in my mind years later.

What does back to bootstrapping mean? While it means yes to owning our direction, it means no to the majority of our strategic plan. It means no to paying ourselves, which is never a popular decision in my household or company. It means a change in our growth, hiring and scaling plans. It means our incredible angels will patiently advise and help and root for us while we grow. It means we continue on our quest to find partners who believe in a fair percentage of our success together.

And how does it feel? It feels gritty, scary, real, exciting and daunting at the same time. It feels great to have solid advisors and networks working with us on our new direction. With the door closed on our Series A, we have gotten even more creative and innovative than we imagined we could. Going back to bootstrapping may have been the best decision we never meant to make for our business.

Looking back over that phase, including multiple pitches per week, I am exhilarated at all we have learned about our management team, our closing styles, our ability to strategize and move forward with innovation, together. I’m especially proud of our ability to pivot, and appreciative of our ability to quickly and nimbly make data-driven decisions for our best way forward.

We have added to our network, our knowledge base, our thick skins and our resolve.

Every pitch is a lesson. We now have PhDs in the power of No.

This post was originally published on CEO WATTAGE, a platform to help achieve gender equality in leadership. Sarah is the Founder and CEO of RightPatch, a Seattle-based biotech company. She is lucky to be from a long line of inspiring women.