Rejection #9

What to do when you don’t get in.

“I could’ve sworn I used my HappyFeed email address for that application,” I thought as a message from 500 Startups popped up in my primary gmail inbox. It’d been weeks longer than estimated and the subject line didn’t look overly enthusiastic.

Breathe in. Breathe out. Click to open. Read.

Hi Matt,

Thank you for taking the time to apply for the 500 Startups Seed Program.

As we’ve gotten an overwhelming number of strong applications, it was a very tough decision to decide who would join us for our next batch. We wanted to let you know that we’re moving forward with other companies for this batch.

Given the sheer number of applications and the fact that we made each decision in the context of other applicants, we cannot provide specific reasons why certain companies were not offered admission.

That said, we strongly encourage you to re-apply to 500 Startups again. Many of our founders apply 2, 3, or even 4 times before getting in — we look forward to helping you join their ranks sometime in the not-too-distant future. :)

Thanks again & keep hustlin’,

I reread the message after my initial scan. “Technically they never said I didn’t get in,” I joked to myself before letting the disappointment settle in. The worst part is the lack of explanation — how am I supposed to grow from this experience? Do they care that I’m a solo founder? Does my market not seem big enough? What about my growth metrics? Do I need a more transparent business model?

The worst part is the lack of explanation — how am I supposed to grow from this experience?

This isn’t the first time I’ve received an email like this. Having been through several application processes with HappyFeed and the startup I co-founded, Quixplore, I’m all too familiar with the rejection email. It doesn’t feel great, but it’s a necessary part of difficult work. I allow myself to feel shitty for a moment and mentally toss the email in my growing “rejection” pile.

Accelerators, Seed Programs, and Incubators

For those of you unfamiliar with the startup world (hello Facebook friends and family), these are programs intended to “accelerate” your company by providing a small amount of capital, advising, and connections to a network of investors. These programs run for a few months and end with a “demo day” where companies pitch to an audience of investors. Traditionally accelerators bring in startups at stages ranging from only having an idea on a napkin to pulling in millions of dollars of annual revenue.

Why you might want an accelerator.

1. Funding. You’ll receive enough money to quit your job and focus 100% on your startup (if you are not already doing so). This usually comes in the form of a convertible note of $20k-$100k in exchange for 5–8% of your company. For those of us without substantial savings, this ability to focus is incredibly attractive.
2. Network. The big accelerators have had dozens of batches of companies by now, which means they have massive networks of founders who have been exactly where you are now. A meeting with a product manager at X company, or a partner at Y VC firm is only a warm introduction away.
3. Advising. Since they are also your investors, accelerators want to see you succeed. For many of them this specifically means helping you reach the point where you can raise a priced round of funding. Most are very good at investment pitch coaching and the best accelerators will help you refine your product and reach the traction you need to accompany that pitch.

Why you might not want an accelerator.

It’s becoming very popular to push against the traditional accelerator and VC funding model in the startup world. The founder of Basecamp and creator of Ruby on Rails, DHH, has written extensively about it on Medium.

Here’s my take:

1. You need to be ready to be a billion-dollar company. Once you’ve joined an accelerator or raised significant capital, you need to worry about your investor’s interests. Many of them have billion dollar funds that depend on the success of a few “unicorn” companies. If you do well and find a $20 million exit for your company, this is a loss for your investors.
2. It’s not “your” company after you raise VC money. Even if you maintain more than 50% of the equity in your company, most investors will request and demand equity with special voting rights and perhaps a spot on your board. If you aren’t meeting expectations, you could be replaced and your dreams for your company will be at the mercy of spreadsheets.
3. Lifestyle companies are kind of amazing. Imagine being able to run your company however you like, grow it however big you want, and maintain your vision and goals without conflicting with return-eager investors. You don’t need to be a “hundred millionaire” to be happy. I would suggest reading some of the stories on Indie Hacker for some perspective on this alternate path.

We might all be a little too enamored of the life of the entrepreneur so beautifully painted by the tech press and Hollywood. We all want to “change the world” but perhaps there are ways to do that without raising millions of dollars.

When you don’t get in

Take some sage advice from Taylor Swift and “shake it off.” No program is going to make or break your company. If you think it will, then you need to seriously consider why that is and how you can manage without one.

1. Keep building your product. This is why you applied in the first place. Don’t take more than a day off to feel bad for yourself. Connect with some of your users and remember what motivates you.
2. Think about your company’s future. What did you expect to get out of that accelerator program? Is there a way you can do this on your own? There’s a tremendous amount of free resources available for startups and people are generally willing to help.
3. Focus on what you are doing right. One of the easiest, proven ways to feel happier is to look at your resumé. We tend to forget our accomplishments and focus more on failure. Try to remember a recent success and make a plan to reach your next one.

Reapplying

Accelerators like to mention that many of their investments were not accepted after their first application. They will openly admit that they make mistakes and encourage companies to reapply. Being that most accelerator programs run twice a year, applying 2–4 more times could mean you won’t get in for 1–2 years. If you are actively working on your company in that time, the 6% you need to give up will become much more valuable and possibly not be worth the benefits.

Reapplying seems to make the most sense if you aren’t fully committed or have yet to see significant traction. However, those are probably the same reasons you got rejected in the first place. It’s a conundrum.

Continuing

I listen to a lot of investor interview podcasts and YouTube videos. One of my favorite moments is when famous VCs admit to and discuss times they passed on an investment in Facebook, AirBnB, or some other clear winner.

I can’t wait to be one of those companies.

Each week in Building Happiness I’ll be covering a new topic about what it’s like bootstrapping a consumer internet company, HappyFeed.

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