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As outside general corporate counsel to well over a hundred startups in all stages of growth in my legal career, across the innovation ecosystem in Silicon Valley and beyond, I am often asked by startup founders and entrepreneurs to help them with capital raising and introductions to venture capitalists, business angels, and family offices.

After fundraising, I am often asked to help with critical hires, scaling, and later on down the road, with exits to strategic and financial buyers.  While I have a method and process to go about serving these recurring relationships and critical clients, inevitably I am asked by startup founders and entrepreneurs what it means and what to do in the face of rejection, how to interpret the word “no.”  As we navigate a “return to work” after a near three-month shut-down of our economies, it’s essential now more than ever to reframe rejection into constructive engagement.

In the life of a startup founder, it is normal and to be expected that she or he will inevitably face rejection in many areas, and for a long time.  It may start with your attempt to engage with a technical co-founder or hire a key engineer, who wonders whether you will obtain enough funding to pay enough salary with enough security to make the leap of faith to quit their “safe” jobs and join you.  Or it may come later when you are raising your first round of friends and family money when your wealthy cousin Vinny won’t write a check.  Or it may be the beta customer that won’t convert into commercial shipment.  Invariably, rejection has many forms and faces.

Many people smarter than me have prognosticated on how to handle rejection.  Following are four tips to manifest constructive engagement rather than rejection:

  1. Preparation and follow-up
    Do your homework.  Know who you are meeting with.  Spend five minutes reviewing LinkedIn profiles, common contacts, google search, research the stage of growth, industry vertical and geography where your potential investor likes to deploy capital. Get a warm introduction to someone before cold calling.In every meeting, in addition to preparation, you need to find three ways for you to follow-up with your counterparty with value-add for them, and hopefully leave a popcorn trail of how they can follow-up with you, so that you can build a relationship of trust and confidence over time.If you get a “no” from a potential customer, consider asking for feedback on why they went with another solution.  If you get a “no” from a potential investor because you are “too early” or “too late”, ask if they have recommendations for who you should contact, or how your pitch could have landed better.  At minimum, thank everyone that you meet with for their time and interest.  Find common areas of interest that will allow you to follow-up over time.
  2. Behavior and Fit
    Your judgment and character are constantly being evaluated in every interaction, starting from how you treat the barista who makes your morning coffee to the Uber driver to your pre-meet greeting.  Be kind, courteous, fair and consistent in all of your behaviors.  Make sure your reputation online reflects who you are and how you want to be perceived.  You should assume that whoever is meeting you is doing a google search on your name and reviewing your LinkedIn profile and Twitter feed.  Don’t be weird in the meeting. Don’t overpromise. Cardinal rule:  don’t ask someone to do something you would not be comfortable doing yourself if you were in their shoes.Whether you are pitching a new customer, a new investor or a potential new hire, relationships matter.  As renowned sales coach John Livesay writes in Better Selling through Storytelling, “[p]eople love to work with people that they trust, like and know.”  Entrepreneur/investor relationships average ten years, longer than the average marriage. Find the fit. Evangelize. Inspire. Get along.If the fit was never there, consider whether it was not meant to be.  If your star engineer is departing, plan an exit interview and respectfully ask why.  Is there a lesson to be learned?
  3. Business basics
    Fundamentals of your business model have to be right. Avoid both small and highly competitive markets. Demonstrate barriers to entry. Show traction of how you have already started executing on the idea. The numbers matter…revenues, gross margins, metrics, and increasingly in the post-COVID19 era, cash-flow break-even and profitability matters.  If you aren’t there, how can you evolve your business model to get there faster?
  4. Everyone makes mistakes
    You might have done everything right, and the customer, investor or potential new hire still says no.If you keep hearing no, should you shut down the business? Should you double down? Refocus on business fundamentals? Make company stronger? Ask yourself.

Entrepreneurs will always have a potential customer not yet ready for their innovation, a strategic partner who prefers to wait until next quarter or next year, and a potential investor who say they are either too late or too early. In the post-COVID-19 era, getting to yes from anyone seems like a Herculean task.  Now more than ever, entrepreneurs need to handle rejection gracefully, and reframe it as constructive engagement.

Some startup founders take rejection the wrong way, either ignoring the nay-sayer, or worse, taking personal offense and even lashing out. While you may suffer from a bruised ego, the way you prepare for, conduct and follow-up from each meeting speaks volumes to your target audience about your aptitude for future success.

Author Louis Lehot

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