If you pitch to investors and they don’t dive into your deal immediately, you have to determine why. The most common reasons for a lack of immediate due diligence are that the investor didn’t understand the company or that the investor will never be interested.
If the issue is that the investor didn’t understand the company, don’t just jump to the conclusion that the investor didn’t get it. If you do, you may be missing out on some valuable information. Here are some things to look for when getting feedback from an investor who has not invested:
The company is valued too high for its risk stage.
There is too much risk left in the company.
The team is not right, not complete, or contains someone that the investor doesn’t like.
Your business plan has a fundamental flaw.
A regulatory law or upcoming change in legislation may put the company in jeopardy.
The market is at risk from a competitor.
The company is just outside the (venture capitalist’s) VC’s industry expertise area.
Sometimes investors really aren’t interested and never will be. That happens. But other times, just one thing may be causing the investor to feel lukewarm on your deal. If you find out what the problem is, you may be able to turn the investor’s tepid feelings into something much warmer.
If you have spent time connecting with a specific VC and then you blow her off because she doesn’t enter into due diligence immediately, you just wasted your time. You must follow through with the investor until you get a clear message that she is not interested or not able to invest in your company.
Listen very closely to all comments and feedback. You will probably have to read between the lines a little bit. VCs really do like entrepreneurs and have no desire to squash anyone’s dreams. It’s hard to give advice, rejection, and support all at the same time. Ask for clarification if you are confused.
Be careful not to make changes blindly in response to potential investors’ advice. Hear the advice and really use your judgment to determine whether the suggestions make sense for your company and the direction you believe you should go. Investors don’t know everything, and they don’t know your company as well as you do.