Put all your eggs in one basket, you say? You'd be surprised at how many others have done the same. Learn from this and move forward with even more momentum than you had previously. I'll show you how.
The information and advice I am about to give you may seem extremely obvious. It has to be shared, though, because there are so many of us who are such amazing entrepreneurs; we think positively, love taking risks, veering off the beaten path and marching to our own drummer. Along with that awesome gambling mentality comes a strong force of passion, commitment and belief. Every single one of those traits is necessary to found a start-up company. What is that saying, ‘Believe it is and it shall be’? I’m all about that mentality, but want to be sure we have the triage kit to pick ourselves up and get back on track once the unthinkable happens: the investor or investment company we searched long and hard for suddenly chose a different dirt road to wander down. It happens more often than not, otherwise you would stop reading this right now and go found a start-up.
I am in the business of assisting start-ups in the taking off phase. Prior to the advances in technology and the newest wave of start-up companies post-recession, I helped non-profit organizations in the areas of monetary and program development as well as fundraising. It's safe to say that I have seen investors pull out a card from the card house a few times. Over the course of my career, I have watched, literally, hundreds of companies close their doors due to poor business practices, (and those currently popular words “emotional intelligence”) and I do not want this to happen to you!
Here is a list of the very best advice (Do’s and Don’ts) I have culled from a career in the realm of fund generation for when an investors pull out of a deal:
Do not go public about your partnership until all papers are signed, sealed and delivered.
Oh how easy it is to share your excitement about your newly found potential growth with your spouse. Your Twitter feed. Your networking group. Your 10,000 connections on LINKEDIN. Don’t. Do. It. People talk, yes they do. You don’t want it getting back to the investor before the ink is even dry, and you don’t want to have to make the announcement that things didn’t go as planned. It draws the perception that maybe you didn’t have your ducks in a row, a sound business plan, or worse. Capiche?
Do tell every member of your team immediately.
You have worked hard to choose the perfect members of your team. The ones who fit into their roles perfectly, share your company culture and are dedicated not just to your vision, but YOU. They may have mentally gotten so excited about funding that they may have already been planning months ahead with their lives and perspective income. Remember when Chevy Chase put a down payment on a pool and got Jelly-of-the-Month-Club instead of a bonus? A little different, but we want to save sanity for all involved, right?
You also need to tell all team members at relatively the same time. It is your choice to phone or email, but phone or in-person gives you bigger cojones. You can do it all at the same time, in one email or conference call, or give each team member the personal news. Your choice. The last thing you want is for one of your team members to hear it from another team member. That instantly builds resentment against who do you think? Yes, YOU.
Do take time to grieve the loss.
Believe it or not, in a sense, it really is a loss, even if it wasn’t the proverbial “bird in hand”. It’s the loss of what could have been. Take a week and go easy on yourself. Ponder on all the different aspects of why the deal didn’t go through. Focus on other projects. Do something nice for yourself to feel better (within reason, don’t buy a new car or anything). Give your team members a week to grieve also, remember, if they are committed to you, and your enthusiasm I’m sure is contagious, they are bummed about the lost opportunity as well. If you’re heading into two weeks of mourning the loss of a business deal, you really should not be founding a start-up.
Do re-evaluate your direction.
Maybe you were jumping through hoops to meet some criteria for the investor, or working hard to highlight that portion of which interested the party most. Is that where you want to continue going? I bet there are lots of different avenues of your venture you could capitalize on. Meet with your team and ask their thoughts. Make sure each team member has a clear vision of direction before going forward. You don’t want to get stuck on the hamster wheel.
Do brainstorm new options.
Does the withdrawn investor have competitors? Maybe they would like to learn more about your venture, and maybe quietly mention that investor (a) is going to regret passing up this opportunity. I’m sure you have a smoother way of sharing that information than I just suggested.
Pick a new niche or demographic and set each team member off on a mission of new discovery. Share your ideas and capitalize on what each other is doing. Hire a development consultant if you feel stuck.
Do know that the investor pulling out was probably a good thing after all.
If the investor pulled out, listen carefully as to why they chose to do so. It may have had nothing to do with your venture, and everything to do with the investor’s own circ*mstances, whether it be cash poor, over committed or maybe just doesn’t really share your vision or values. Better to find out now rather than later on, once everyone is entwined financially and legally, right? If the concerns were actually about your proposal, what can you do to make changes before presenting to a new party?
If you truly believe in your product or service, you know the right investors are out there, it’s just a matter of getting your word out and excavating new potential opportunities.
Now that you know how to dust yourself off, do it and get back out there. There are plenty of us cheering you on and continue to believe in your remarkable product or service.
