120. Reasons Investors Pass On Your Round—NOT On You

VC Minute
Let's reframe this: investors don't pass on YOU; they pass on opportunity right now for a specific set of reasons. Some of which you know, some of which you don't know.

VC Minute – quick advice to help startup founders fundraise better.

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Rachel McCrickard

Let me give a little bit of my perspective on the reasons that investors pass. This one was a hard one for me. I remember actually one investor, Zach Lynch, saying to me once that I was telling him that, you know, this investor passed and it was so hard, and I said, “They passed on me.” 

And he was like, “They didn’t pass on you. Let’s reframe this. They passed on the opportunity of Motivo right now for a specific set of reasons, some of which you know, some of which you don’t know.”  

I think that as founders, because our companies are so personal to us, we have a tendency to take it as a personal rejection.

Anytime that an investor that I really wanted to work with passed on me, I felt it. It was so hard for me. But when I began to learn, a few investors told me, “Let me tell you the reason I’m passing. It has nothing to do with you and it has nothing to do with the company.” 

This one in particular that I’m thinking of was at the beginning of their fund. And oftentimes, at the beginning of the fund, the VC needs to make a huge splash with the first investment out of their fund, and it needs to be a big one.  We were asking for a co-lead situation. It just wasn’t splashy enough for their first investment.

I think one of the things that founders oftentimes don’t realize is that investors are doing the same things that we are doing. They are beholden to their LPs, and they have to answer to somebody else, and they have to demonstrate, “This is why we invested in this one, and this is what we’re going to do next. And they’re thinking about their own fundraising perspective when they have to go back out and raise their next fund. And maybe they’ve invested in another mental health startup recently, and maybe it’s competitive with your startup or just too close to it. Something like that

There are all these other reasons. So, I just choose to believe that it’s probably one of those reasons, and I think that’s helpful for my mental health.  

At the same time, I definitely do feel like there are things that I learned through the fundraising process that I could have done differently and reasons that people passed on us because of that.

But it’s not always like, “I rejected you, Rachel. It’s probably never been that they rejected you, Rachel. It’s always a lot of other elements at play.

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