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Raising funds? Ask for the no!

Charlie Gunningham
Charlie Gunningham

Paradoxically, trying to get angel investors to say ‘no’ can help you raise money. Here’s why …

Reverse psychology can be powerful.

Be kind when friends stuff up and they’ll be shamed into doing better next time. Tell a family member “I’m fine!” through gritted teeth when clearing up and they’ll be honour bound to help.

And so it goes with early stage (seed) capital raisings for startups.

Ask for NO!

The best advice I was given when pitching my fledgling tech business to potential angel investors was “try to get them to say no.”

This works beautifully on so many levels.

Firstly, if they absolutely can’t say no, then they’re probably going to be a yes.

On the other hand, if they’re vacillating, telling them that ‘a no is fine’ will let them off the hook. And you want them off the hook because time wasters will do your head in. You will lose the will to live. And believe me, there are lot of people out there who will waste your time. They like to appear as if they might invest, but they never will. Maybe they genuinely are not sure. Maybe they’re just looking ‘under your hood’. Maybe they like the ‘shark tank’ power position. Drop these people as fast as you can. Demand the no!

Counter intuitively, if you tell a genuine investor they don’t have to invest, they may be more interested in doing so. (‘the fear of missing out..’). It’s a classic ‘sales closing’ move. It’s also a bit like putting someone on silence. They have a sudden urge to speak.

But you don’t want someone investing who is not that keen on investing. They will become a millstone around your neck. (In fact, do you really need to raise anything at all? That’s a story for another day…)

What you want to do is to cut off the time wasters as quickly and diplomatically as you can. The “maybes” who need to talk to their partner, or think about it more, or … any number of reasons.

Ring me next week and we’ll chat” is not a “maybe”. It’s someone who is too weak or shy to say ‘no’ to your face and will give you the run around. What’s another week got to do with the price of fish in Denmark? Precisely.

Stop all this upfront. “It’s OK to say ‘no’, really. In fact I am happy with a clear cut no.”

When you get the no, do one more critical thing…

Say something like: “Thanks for your time today listening to the idea. Now you know what we’re doing, can you please give me 3 other people who you think might be interested in hearing about this opportunity?

You see, a “no” is totally fine. In fact, it eases the tension, and they will be almost honour bound to help introduce you to more people. It’s their quid pro quo for saying no. Permission to go to their networks.

Close one door, open 3 more

While this ‘no’ may shut a door, it should open 3 more. The ‘no’ is just a paving stone along the road to funding your business. The more the merrier. It’s fine. Harvest the ‘no’s’. Make a game out of it (how many no’s did you get today?). The more ‘no’s’ you receive, the closer you are to a ‘yes’. It’s a numbers game. One pitch becomes three, 3 becomes 9, 9 becomes 27 and so on…. you’ll find your money along that road.

Back in 1999, I remember showing our startup idea to one high net worth individual down town. He listened respectfully to our 10-minute pitch. We then closed our laptop, looked at him expectantly and after a small pause he simply said “No, this is not for me, but thank you for showing me your idea.”

I have seen him at various events these past 19 or so years and he is always as respectful, positive and friendly as ever. He passed me on the street the other day, stopped to chat and said how he knew I would do good things in my new role. This was someone who had utterly rejected the investment opportunity I showed him all those years ago. It was totally fine. It was not personal! In fact, a relationship (and mutual respect) formed. He’s someone I can now ring up and ask for advice about various companies I am working with.

Encourage the NO’s. Use them. Embrace them!

Don’t waste time with maybes. Get through the no’s and the yeses will be not far away. Because the yeses are always connected, somehow, to the no’s.

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Charlie Gunningham

Charlie Gunningham

Former co-founder, GM, CEO Business News and Accelerating Commercialisation adviser. Charlie has spent 20+ years in Perth's startup scene, as founder, mentor, adviser, writer and investor. There's nothing he likes more than helping early stage tech startups ... and drinking coffee, shiraz or playing in a blues band. Email Charlie here.
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