What If You’re Too Early for Investors?

Keep me posted on how it goes!

When investors say this, it’s such a cop-out.

Because they’re actually saying:

You’re too early - I’m not gonna invest in this round.

Unfortunately, founders get turned down like this all too frequently.

It’s OK if you’re not a fit for them to invest right now - but it’s only a total miss if you let it be.

Founders everywhere miss tons of opportunities because investors tell them “not yet.”

This really means they:

• Just don’t know you well enough
• Don’t trust you yet
• Want to see you perform first
• (a bit more Machiavellian) Want to see how you handle their rejection & come back

But just because an investor isn’t a fit today, doesn’t mean you should never talk to them again.

You might still be able to use this to your massive advantage.

Here's how:

Step 1: Check it’s actually a fit

Critical: You must establish they’re a Perfect-Fit investor first.

Because if you’re a tech business, and they invest 99% of their money in real estate in Myanmar, you don’t wanna be barking up the wrong tree…

…You also don’t want to be dogmatically following advice from someone who “has money but will NEVER invest in your business.”

Do they invest…

• …in your industry
• …at your stage
• …regularly (not 10 years ago, and never since)
• …in a total round size like yours ($3M is very different from $10M)
• …at check sizes you are targeting ($20K ≠ $2M)

(more detail on defining your perfect-fit investor here)

If so, then you should listen carefully to their feedback - especially if they tell you you’re too early.

Odds are, there’s a disconnect between your business’s current stage vs. their preferred investment stage.

And that’s OK.

Because you’ve been given a golden opportunity to build credibility & trust before your next round.

So here’s what you do…

Step 2: Pre-pitch & ask the Critical Path questions

Caveat with “hey we’re probably too early, but we’re gonna be having this chat in 9-12 months, so let’s build a relationship. In the meantime, mind if I ask a few questions…?”

Have your questions ready.

Here’s what I’d ask:

• What signals do you look for that would make it a slam dunk next round?
• What value triggers would make you say ‘we should def have a conversation’?
• Once we get to your strike zone, how might you approach valuing a company like ours?
• Want an early look when we get there?

…because I get three major things out of that. I now know:

1. Which value milestones to focus on (if I want to work w/this investor or people like them next round)
2. When I’m going to shoot them a ‘let’s get together’ email in 6-9 months
3. A datapoint on their valuation approach - which I can share with this round’s investors
4. I can talk about what later-stage investors would look for with confidence to this round’s investors (wildly valuable, but that’s a whole other topic)

Step 3: Say you’re gonna do it, then go do it.

The simplest trust-building trick in business:

But choose your promises carefully - I recommend:

• Pick 2-3 big things you’re gonna accomplish
• That will massively increase your business’s value (see above)
• That are within your control
• That you believe you can EASILY accomplish within a 9-month period

Founders go wrong here mostly by setting expectations re: milestones outside their control, like “we’ll do a partnership with Microsoft”

Sure - you might believe you can do it today, but what if tomorrow Microsoft torpedoes the partnership deal? You’d be sunk 🌊🚢

When in doubt, pick something that you can say…

If we throw enough money at it, it’ll happen.

Then go execute.

But that’s not all.

Remember - some VCs & fund managers are handcuffed to their fund’s investment criteria.

So even though they might want to invest through the fund, they couldn’t.

BUT I’ve seen VC investors get pitched on a deal and say:

I love it. It won’t fit in the fund yet, but I want to invest personally (i.e. $200K in their OWN name, not $1M in the fund’s name).

It’s rare, but it does happen.

In the meantime,

1. Get em on your investor email list so you can keep them updated.
2. Set a reminder for 9 months “hey we said we were gonna do X - we did it. Time for a chat?”

While you’re in the room, never forget to ask for the referral:

We’re not a fit today, but is there anybody you think we should be talking to right now that would be a fit?

Get your warm intros, and I’ll see you in the next one.