Investors Said No, Now What? | Video Wiz

Summary

Founders should not take investor rejection too seriously and avoid pivoting the entire company based on it. When founders hear the same reasons for rejection from multiple investors, they should assess and dig into those reasons rather than immediately believing them. Consistent reasons from multiple investors should be considered as a data point. Investors assess potential founders based on their ability to build and lead a large organization, pattern matching to previous successful founders and ranking potential founders based on their potential for success. Clear communication and credibility are also important factors in investor decisions. Y Combinator advises founders to keep a list of investors who say no after a demo day and continue sending them updates every month, as actions can convince investors to change their mind. When investors reject fundraising efforts, founders should focus on making progress in their business and use that as a signal to investors.

Introduction

The hosts discuss common advice given to founders by Y Combinator group partners
They explain why this advice is often repeated and how it can benefit startups
The advice helps startups navigate challenges more efficiently

What to do when an investor says no?

Founders often lose confidence when faced with investor rejections, despite being experts on their product and market.
The conversation explores the lies that founders tell themselves when they receive a rejection from an investor.

What is going through the founders' heads

Founders often believe that investors' rejection emails contain the truth about their startup's problems, but investors may have limited knowledge and understanding. Investors' opinions can change without any fundamental changes in the startup, indicating that they may not be experts but rather follow the herd. Founders should not take investor feedback too seriously and avoid pivoting the entire company based on it.

Lie the founder's tell themselves

Founders deceive themselves by attributing investor rejection to obvious flaws rather than the perception of a small market.
Real user anecdotes and a deep understanding of the target market can challenge this assumption.
Inability to effectively counter the objection raises concerns about the founder's ability to comprehend user needs.

What to do when founders hear the same why a lot?

When founders hear the same reasons for rejection from multiple investors, it is important to assess and dig into those reasons rather than immediately believing them. Founders should not internalize or absorb the reasons into their mindset for the company. Only when the reasons for rejection are consistent among multiple investors should they be considered as a data point. Pitching to a lot of investors is necessary to gather this kind of signal.

Assess and dig into the reasons for rejection from multiple investors
Do not immediately believe or internalize the reasons
Consistent reasons from multiple investors should be considered as a data point
Pitch to a lot of investors to gather this kind of signal

What are the real why's?

Investors assess potential founders based on their ability to build and lead a large organization, pattern matching to previous successful founders and ranking potential founders based on their potential for success. Fundraising is primarily about raising money to build a big company, and investors may reject founders who don't align with this goal. Clear communication and credibility are also important factors in investor decisions. Investors may initially reject companies based on conflicting information or doubts about the founders' abilities, but they also acknowledge that founders can change and improve over time. Y Combinator stands out by being willing to reconsider and invest in previously rejected companies.

Advice after demo day

Keep a list of investors who say no after a demo day
Continue sending them updates every month
Actions, not words, can convince investors to change their mind

Takeaway

When investors reject your fundraising efforts, it is important not to lose confidence or make drastic changes to your product.
Instead, focus on making progress in your business and use that as a signal to investors.
Believe in the "no" from investors and continue to stay confident and seek out other potential investors.

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