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Investors Said No, Now What?
7 segments available
Step inside the Group Partner Lounge to hear Y Combinator Group Partners Harj Taggar, Michael Seibel and Brad Flora discuss how you should handle rejection from investors and why you should "believe the no, not the why." Apply to Y Combinator: https://www.ycombinator.com/apply/ Work at a startup: https://www.ycombinator.com/jobs Chapters (Powered by https://bit.ly/chapterme-yc) - 00:00 - Introduction 00:42 - What to do when an investor says no? 01:44 - What is going through the founders' heads 05:36 - Lie the founder's tell themselves 07:15 - What to do when founders hear the same why a lot? 09:17 - What are the real why's? 13:18 - Advice after demo day 13:54 - Takeaway #ycombinator #startups #investors #money
Segments Timeline
Handling Investor Rejection
Y Combinator partners discuss the emotional impact of investor rejection on founders. They emphasize the importance of believing the 'no' rather than the reasons given by investors, highlighting how founders often undervalue their expertise compared to investors who may not fully understand their unique market.
"hello this is michael with harj and brad welcome to inside the group partner lounge so as yc group partners we find ourselves repeating the same often seemingly obvious advice to founders over and ove..."
The Lies Founders Tell Themselves
The partners explore the common misconceptions founders have after receiving rejection emails from investors. They explain how founders often believe that investors, as perceived experts, provide accurate reasons for their decisions, when in reality, investors may lack deep insights into the startup's unique context.
"surprises us because from our perspective the founders are the experts on the product the market like everything they're doing they think about it day in and day out and yet they can have everything s..."
The Danger of Overreacting
Founders often feel compelled to pivot their business based on investor feedback. The partners caution against this reaction, explaining that investors' opinions can be superficial and that founders should maintain confidence in their vision rather than drastically altering their approach based on a single rejection.
"you it's like that saying right it's like oh what is it like you know no a little bit of knowledge can be dangerous it's like i think investors end up knowing just enough to be dangerous um because an..."
Recognizing Patterns in Rejections
The discussion shifts to the importance of recognizing patterns in investor feedback. Founders are encouraged to take note of consistent reasons for rejection across multiple pitches, but they should not internalize these reasons as definitive truths about their business.
"[Laughter] so you get this rejection and you think well i'll go back to them i'll convince them that they're wrong that they misunderstood something and if i say the right thing in the follow-up email..."
Understanding the Real Reasons Behind No
The partners delve into the deeper reasons investors may reject a startup. They emphasize that investors often engage in pattern matching and stack ranking, which can lead to rejections based on comparisons rather than the startup's actual potential.
"the founders tell themselves is that the glaringly bad thing about my company isn't the reason why this investor didn't invest it's the reason that they wrote on the piece of paper so it wasn't i don'..."
The Importance of Progress Over Words
After demo day, the partners advise founders to keep investors updated on their progress rather than trying to convince them with words. They stress that tangible progress in the business is a more compelling signal to investors than any changes made to a pitch or presentation.
"what are the real whys like i might argue that like the really brave and honest investors might give you some of these wise these are wise that maybe you should pay attention to if you're getting them..."
Final Takeaway: Believe the No
In closing, the partners reiterate their key message: founders should believe the 'no' from investors but continue to pursue their vision with confidence. They encourage founders to remember that there are always more investors and to focus on building their business rather than getting discouraged by rejection.
"i repeat after demo days over over and over again is keep a list of the investors that said no like who seemed reasonable about it and like just keep like keep sending them updates keep sending an upd..."