Founder Q&A: The Investor Passed on Me - What Should I Do Now?

Jason Yeh
May 2, 2023

I receive hundreds of emails and DMs every month from people asking for help and advice. I wish I could answer them all, but time just doesn't allow it. So, I had this idea: why not put me on the hot seat and answer all the questions I receive about a specific topic?

For our first Q&A, let's dive into a topic I know a lot of founders are anxious about - managing investors who passed. Let's go!

Investors Who Passed

Got countless passes, but it still stings. Any advice on not letting it get to you?

Fundraising is a numbers game. With the right process, you'll have so many other meetings lined up that your mind won't have as much time to dwell on it - you have other investors to prepare for, it's on the next. Founders need to understand, especially during the early stages, that investors might decide to pass for completely arbitrary reasons. It doesn't mean that you're running a bad business, or that you're not a credible founder.

Often your story just isn't resonating with that particular investor, at that particular moment- but that doesn't rule out another investor out there who will take the plunge with you. Individual passes mean nothing.

Should you send a follow-up email to investors who passed? What do you include in that email? How soon should I follow up?

Founders need to first understand that it's not easy for an investor to pass. They don't want to be the one who missed out on the next AirBnB. If they're a competent & experienced investor, understand the game, and not an A-hole - all big ifs- they likely have the self-awareness that they could be wrong.

On the other side of the coin, founders should realize that even after a pass happens, there still could be a relationship there, and you might wind up pitching them again in the future. Take it in stride, remain level-headed, and respond in a way that's confident - all indications that you're a founder who can succeed with or without this individual investor.

So what should you actually do? I think it's perfectly appropriate and polite to thank them for their time in a short e-mail. Don't try to change their minds. Let future experiences and positive signals change their mind. Your words in that moment are not going to reverse their decision.

Is it appropriate to ask for feedback on why the investor passed?

A lot of founders can get confused / upset about passes and it's completely natural to want to know the reason someone passed, to want to learn from it and get better. But the vast majority of the time, they passed simply because they just weren't excited enough.

It's rarely the case that the investor loved EVERYTHING about the opportunity except for just these two things that could be better... and if only those were better, then they would do the deal. Your chances of getting specific, valuable feedback are likely pretty small. Investors aren't going to react positively to being interrogated on why they passed or having to do extra work.

That being said, especially if you have an existing relationship with the investor or for whatever reason think that their feedback would be valuable, then keep your request simple. "By the way, I'm always trying to get better- if there's any quick, honest feedback around me or the deal that I can take with me, please share."

I had a meeting that I thought was going well, but it was pretty informal and there wasn't a real yes or no at the end- they said they were interested and they'd follow-up. Haven't heard back yet, how soon should I follow up?

You don't want to come across as desperate or thirsty - definitely a signal you need to avoid in fundraising. In general, I would feel comfortable letting a week elapse before reaching out. Reach out in a way that is full of confidence and talk about continuing the process you're running. Indicate that the process is moving along without lying - don't say you have five term sheets incoming or that next week is packed to the brim with second meetings if that's not the reality. "Hey, great talking last week. I'm making sure my next meetings are all happening, and I just want to stay on this. Let me know can answer any other questions you have." It's a small nudge, nothing too eager.

One of the concepts that can help here is "What Would Patrick Collison do?" Let's say there's an investor he wanted to follow up on - what would he do? He'd probably think, "This firm should want to invest in me. What do I have to lose?" And then reach out politely and confidently with a short message/nudge, knowing that this one meeting won't break his process.

How can I stay on the investor's radar without being too pushy or needy?

First, connect with them on social media platforms - especially on LinkedIn where if you connect with them then they follow you, where your updates are hitting their feed. Posts on hiring, new partnerships, spotlights on members of your team can all be great indicators of progress where you're not pushing the message to them. Use our founder's guide to social media posts for inspiration:

I've told people that I don't love the idea of an investor update specifically for outsiders, unless there's actual progress that you think will move the needle. There is definitely value in getting all investors on a list where the message is more "You're receiving this message because we had a great interaction before. We need help because we're killing it- these things are happening, what we're looking for / what would get us to the next step is ___"

I also encourage you to have more one-on-one interaction with them between now and the next time you need to fundraise, and this can be done in a number of ways depending on what your relationship is. Some ideas include:

  • If your product would be valuable for their portfolio companies- "We're helping a ton of companies that look like X. We think we can help this company in your portfolio by ___." That's a great way for them to support their companies while also hearing about you doing well.
  • If you developed a good enough relationship where you can reach out and say "I had a great time meeting you. We're doing awesome right now. I know you are an expert in A, B, and C. If you have time, I'd love to find 15 minutes with you and see what your perception of ___ topic is."
  • Finding ways for them to hear about you from a trusted source. Never underestimate the power of an unbiased third-party endorsement.

How can you keep your confidence up after getting a pass?

Have you heard of the concept of "fear and faith?" Needing to go pitch after a rejection, the natural tendency is to be afraid of the outcome and what's going to happen to you because of the recent negativity. But fear and faith are essentially the same thing all the way up until the last point - they both involve the expectation of something happening in the future that has yet to be determined. In one case you're expecting something bad to happen, in the other you're expecting something good.

I encourage people to have faith in the process, have faith in themselves because whether you let the fear swallow you or if you're optimistic and get pumped for the next opportunity, that's how you're going to show up in the next meeting - somewhat of a self-fulfilling prophecy.

Also, realizing that passes aren't personal - reminding yourself of that is very important. And again, this being a numbers game - I'm sure you're familiar of examples like Airbnb and Uber being passed on by a ton of investors but having the resiliency to ride it out.

What other topics/questions do you want me to cover? Submit them here and I might just answer them in a future newsletter 😀

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