Fundraising? Get the ‘No’

tl;dr: When fundraising, track your progress by how many ‘no’s you've gotten

I wanted to share a quick tip that may help you if you’re raising money for your startup (or going through any kind of sales process, really). I can neither confirm nor deny that my startup Trinket is raising money right now. But I can tell you that how many ‘no’s you’ve gotten from investors is a great way to measure progress.

Why? Getting ‘no’s requires you to do three key things that will help you get ‘yes’s over time:

  • Get lots of meetings
  • Have a clear ask
  • Keep up momentum

This may sound like a dumb idea, since the point of pitching someone is to get ‘yes’s. Let’s dig in and look at the benefits in more detail.

The benefits to looking at the fundraising this way and they fall into a few categories:

  • Math: Most startup founders I talk to took 50–100 meetings to close their 5–20 investors. That’s a lot of ‘no’s. If you have a 10% conversion rate, you’ll need 9 ‘no’s for each new investor you close. What’s more, by making sure to get the ‘no’s you’ll be able to estimate your actual conversion rate once you close your first money, which is helpful for knowing how many more meetings you’ll need to get.
  • Psychology: Fundraising can be psychologically taxing precisely because we don’t like getting told ‘no’. By flipping it around into a goal, you can turn ‘no’s into momentum instead of a drag.
  • Game theory: Investors have all the incentive to make you think they’re into you, even when they’re not. By keeping after them until you get a firm ‘no’ you can avoid dangerous self-delusion and prioritize more promising prospects. This persistence also happens to be a great sales technique.

Ground Rules

‘No’s are not all created equal. Make sure you follow these rules:

  • Track your progress & conversion rates. Your conversion rate is 0% when you start. If you still don’t have a ‘yes’ after, say, 100 meetings and you need 5–10 investors, step back and check whether your goal is realistic at your current conversion rate. If it’s not, dig in to why your conversion rate is so low.
  • Pitch people who are relevant to your goals. In the case of fundraising that means they need to be able to invest and interested in your type of deal. No cheating by asking investors who don’t invest in your type of startup, etc.
  • Practice good network hygiene. By that I mean get warm introductions, make sure they’re double opt in, and thank people who make intros for you.
  • Only hard ‘no’s count. That means you have to keep asking until you get a straight answer, another good sales technique☺

Fundraising? Get the ‘Yes’

The ultimate goal of getting ‘no’s is to get the ‘yes’. But the steps of getting a meeting and making the ask are the same. Shoot for a yes but pat yourself on the back for each ‘no’ as well: they’re part of the process!