Why Wall St. Won’t Work With You (+ What To Do)

I’m a former investment banker here to tell you why investment bankers aren’t interested in working with you - and what to do when that happens.

Do this right, and you’ll end up with superstar bankers cutting their fees to work with you.

Get it wrong, and you’ll get rejected again & again, stuck in the dark wondering why none of the good bankers want to work with you.

Unfortunately, most founders don’t know the painful truth:

The best investment bankers only take on deals where you don’t really need them.

Remember this scene from The Big Short?

This is where Wall Street rejects you.

There’s a whole host of reasons as to why bankers don’t want to work with you:

• You’re not in the bank’s strike zone
• Investors don’t like your sector right now
• They don’t actually have connections to the investors you need

…Or it could simply be the fact that you weren’t referred in.

No matter the reason, you’re still gonna move forward.

Here’s your plan:

Step 1: Understand why you got rejected

Once upon a time, I ran an acquisition deal to acquire assets from Exxon. The assets were on 4 continents, DD documents written in 5 languages dating back to the 1940s priced in French franks, Italian lira etc… 40,000 pages of diligence materials.

Transaction size? About a quarter of a billion dollars.

And that was a FAR easier deal than your average $2M capital raise.

…with a lot bigger fees attached.

Not every banker is working on deals like that, but here’s the most common issue you’ll run into: there’s not enough money in your deal.

Banks have target earnings brackets for deals they work on:

• Small bank, maybe $300-$500K minimum
• Big bank, might only make sense to work on a deal where net fees north of $5M+

So if your business is at the stage where you’re only raising $1.5M, even 10% of that deal is only $150K.

Most banks won’t touch deals that small.

If you’re getting rejected, ask yourself & the banker these questions:

• Do we lack a business / capital raising track record?
• Is this a segment of the market the banker just doesn’t have connections in?
• Are we trying to raise too much, too fast?

Just like investment banks (and your business too, probably), my business has extremely tight criteria on who we work with:

• Founder / CEO understands how high the stakes are when you’re sitting across the table from an investor who could write you a check for $10M. Maybe because they’ve raised before, or have one or multiple exits
• Capital raise / Transaction size is large enough that our engagement fee is a no-brainer vs. the improved success + speed to raise + market acceptance outcomes we deliver
• Within our target industries (tech, fintech, healthcare, consumer)
• Has the potential to go big, and must be a blast to work with

This list isn’t exhaustive, because there’s about a dozen more checkpoints we look for, but you get the point.

Whenever we don’t work with someone, I always try to give a clear reason as to why it wouldn’t be a great fit right now, and what would make it a fit later.

Most often, it’s within your control, and you just need to…

Step 2: Shore up your business

It sucks to hear, and you might not get this as a straight answer…

…but sometimes you just need to grow your business & get a bit more traction.

All of these might be moves you can make:

• Pursue that big distribution partnership
• Cut costs & get laser-focused on delivering a step-change in growth
• Talk to your customers more - and get them to leave you powerful reviews & case studies
• Raise a small bridge round from friends & family, convert that toxic debt or run down your non-dilutive financing options
• Launch that new product (even if it’s a broken v0.9!)

Grow revenue, and make that big step-change in your business’s growth path, and you’ll start to hear bankers’ tones shift pretty quickly.

Most people won’t do this because it requires looking in the mirror, and can be painful.

But once you do, you have a much better story to tell for what comes next:

Step 3: Supercharge your story

Once you’ve got a more compelling story from Step 2, now you can use it to your advantage.

…because it might have sucked last time you tried to tell it to a banker.

Your old pitch might have:

• Been more geared toward customers than investors
• Told a crappy, non-compelling “vanilla” story
• Lacked an investor story entirely

If you gave them any of these, they were sitting there thinking:

There’s a lot of heavy lifting here. This is gonna be a headache.

And since bankers’ compensation skews heavily towards closed deals, headaches mean nobody gets what they want.

So you need to troubleshoot your pitch, and build in your new story blocks.

Craft that pitch to be so dynamite, that when it’s time to interview potential bankers, it’s crystal clear:

You don’t NEED them.

Then they won’t be rejecting you - they’ll be falling over themselves to win your business (and cutting their fees).

P.S. - If you’re ready for this part but just want to get it right the first time, then let’s have a chat.

Now to take it even further…

Bonus: Build your own round

This is the core playbook of most of the founders & CEOs I work with:

We know who to approach - we’ll just do it ourselves (mostly)

8.7 times out of 10, a banker will come up with just about the same list of potential investors as you’d come up with yourself.

…just with 30 more [low-value] names on it.

The best place for direct investor feedback: from investors themselves.

So build your list, make a few key approaches, and you might find you’re starting to build your own round.

When you come to a banker saying:

We’re going to raise $50M, and I have soft commitments for $35-40M…

…they’ll want to jump through the phone & kiss you.

They’ll absolutely work with you on the remaining $10-15M, and you’ll probably be able to negotiate 0% fees on what you raised yourself.

When you’re there, pass it through the grapevine & watch them come running.

But when you know what potential investors are looking for better than your bankers do - and have the direct relationships - then you’re in control of your future.

There’s no one better at snowballing your own success, than you.