Don't Be Afraid To Say No

Money, as defined by Merriam Webster, is something generally accepted as a medium of exchange, a measure of value, or a means of payment. [i] For many (social) entrepreneurs, especially those in their early stages, money can be defined as the lifeline to a start-up, because “if you don’t have a money you don’t have a mission.”[ii] This understanding can send a lot of early stage entrepreneurs down the wrong path, as they chart a course for millions of dollars to keep their mission alive. But as history demonstrates it may be best to say no to the millions, when it is offered.

You are probably thinking, is he mad? If my venture were offered just $1 million dollars I would gladly accept it.

While I am not mad, and reasoning such as it can be tough to keep the lights on at your struggling startup does merit taking the money, other factors should be investigated; such as founders’ remaining control over the venture and the potential payouts after accepting the $1 million dollars.

As a new kid on the block don’t be afraid to say “No” to potential investors. Most sales bibles stress “every ‘No’ gets you closer to a ‘Yes”.[iii] Not every deal will be a great deal with your venture’s interest in mind, so an entrepreneur must reject a few, if not many offers, before he or she finds an offer that is right for their venture. Taking it a step further, John Fearon explains that 20% of the people you will speak to will give you 80% of your desired funds (“80/20” rule[iv]). Therefore, it is important to speak to many people in order to land the investors you need.

As you are searching for money here is something to keep in mind when pitching to investors; if you are receiving an overwhelming amounts of Yeses then it is likely you have set your price too low. Fearon explains that multiple interests from investors is an indication that you should maximize your opportunity, and to avoid cheapening your company’s valuation, set a price point, according to the 80/20 rule.[v]

Is there such a thing as raising too much money? Well yeah, and that happens when your raised cash equals the total amount of your company’s valuation.[vi] When this occurs you are no longer the owner(s) of your venture, your investors are. Therefore to mitigate this potential risk raise enough money to get you to the next stage, whether that be prototyping or marketing. Put even simpler, don’t pad the bank account for the sake of padding or to feel secure.

Ultimately, it is important that you hold out for the right deal and appropriate investors because that will get you to the optimal millions. Have any stories about your experience with making deals; share them in the comments section.   

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[i] http://www.merriam-webster.com/dictionary/money

[ii] Social Innovation Incubator Lecture. Tim Zak, 2015.

[iii] When-And Why- You Should Say “No” To $1 Million: Imagine your investors say, “Yes” and you get the money. Is it really time to celebrate? John Fearon 2013.  

[iv] When-And Why- You Should Say “No” To $1 Million: Imagine your investors say, “Yes” and you get the money. Is it really time to celebrate? John Fearon 2013.  

[v] When-And Why- You Should Say “No” To $1 Million: Imagine your investors say, “Yes” and you get the money. Is it really time to celebrate? John Fearon 2013.  

[vi] When-And Why- You Should Say “No” To $1 Million: Imagine your investors say, “Yes” and you get the money. Is it really time to celebrate? John Fearon 2013.