VC rejections are like getting denied at the airport security.

The next step is to check what you left in your bag and try again - maybe without the nunchucks this time.

Next Steps After VC Rejections

Why Read:

• Understand how to interpret and respond to VC rejections, and use them refine your business plan, and systematically reduce startup risks to improve your chances of securing funding.

Featuring:

• Sahil S, VC at Stedu Fund

Link: 

• “Marc Andreessen: When VCs Say “No””

Key Concepts and Tactics:

• Understanding the Significance of Multiple VC Rejections:

  • Point: Recognize that consistent rejections from VCs indicate a problem with your plan, not just bad luck.

  • "I agree that one 'no' doesn't mean anything—the VC could just be having a bad day. But If you meet with five or six or eight VCs and they all say no, it's not a coincidence. There is something wrong with your plan."

• Refining Your Plan After Rejections:

  • Point: Focus on improving your plan rather than pitching to more VCs after multiple rejections.

  • "Meeting with more VCs after a bunch have said no is probably a waste of time. Instead, retool your plan—which is what this post is about."

• Interpreting VC Responses:

  • Point: Understand that VCs often avoid direct rejections to keep options open for future investments.

  • "Remember VCs rarely actually say 'no'—more often they say 'maybe', 'not right now', 'my partners aren't sure', or 'that's interesting, let me think about it'. They do that because they don't want to invest in your company given the current facts, but they want to keep the door open."

• Applying the Onion Theory of Risk:

  • Point: Systematically reduce layers of risk in your startup to make it more attractive to investors.

  • "So how do you retool your plans? - Consider the onion theory of risk."

  • "Just like you peel an onion and remove each layer in turn, risk in a startup investment comes in layers that get peeled away—reduced—one by one. Your challenge as an entrepreneur trying to raise venture capital is to keep peeling layers of risk off of your particular onion until the VCs say 'yes'—until the risk in your startup is reduced to the point where investing in your startup doesn't look terrifying and merely looks risky."

• What are the Layers of Risk:

  • Founder Risk: Evaluate team dynamics; consider adding or replacing founders if needed.

  • Market Risk: Validate the market practically; seek paying customers or credible prospects.

  • Competition Risk: Ensure strong differentiation; avoid claiming no competition.

  • Financing Risk: Rethink and reduce future funding needs; optimize your financial plan.

  • Technology and Product Risks: Build and demonstrate your product; focus on progress.

  • Hiring Risk: Add crucial positions to the founding team if concerns arise.

  • Remember, the key is to make progress, build products, and continuously peel away risks to optimize chances of securing funds. Adapt, refine, and repeat until you hear that coveted "yes"!"

Are Strategic Plans Still Useful?

Why Read: 

• Understand modern strategic planning approaches, including short-term adaptability and scenario planning while maintaining a flexible long-term vision in a rapidly changing business environment.

Featuring:

• Admired Leadership (@AdmiredLeaders), a development program focused on leadership behaviors that create loyal followership & results.

Link:

• “Given the Pace of Change, Are Strategic Plans and Business Forecasts Still Useful or Even Necessary?”

Key Concepts and Tactics:

• Understanding the Limitations of Traditional Strategic Planning:

  • Point: Recognize that long-term strategic plans have become less useful due to the rapid pace of change.

  • "Traditional three-to-five-year strategic plans, which were once the mainstay of successful enterprises, are now laughable in their lack of utility. The pace of change in the marketplace has rendered the trends and assumptions that fuel forecasts almost meaningless over any length of time."

• Reframing the Purpose of Strategic Planning:

  • Point: Use strategic planning for clarity and testing assumptions rather than certainty.

  • "For the best teams and organizations, strategic planning continues to be an essential process for reasons of clarity, not certainty. Planning creates clarity and allows leaders to test, explore, and challenge their working assumptions about the future, no matter what the timeframe."

• Adopting Scenario Planning:

  • Point: Incorporate scenario planning to prepare for multiple plausible futures.

  • "In addition to setting priorities based on forecasts, contemporary planning explores possible scenarios regarding multiple plausible futures. This gives leaders the best chance to plan successfully without denying the likelihood that the marketplace will change more quickly than they anticipate."

• Focusing on Short-Term Planning:

  • Point: Shift focus to short-term planning while maintaining a broad, flexible vision.

  • "While it likely no longer makes much sense to create forecasts and engage in strategic or scenario planning beyond a year, that doesn't prevent leaders from crafting a vision that gives the organization something to shoot for in the future."

• Implementing Frequent Plan Reviews:

  • Point: Regularly review and update plans to keep them relevant.

  • "In a world of fast change, checking in and revisiting any plan or forecast more frequently is essential. What this means for leaders and organizations is an ongoing planning process that occurs quarterly or even monthly. Anything less suggests a plan that will likely become obsolete before leaders can catch up."

• Redefining Long-Term Planning:

  • Point: Use long-term planning for learning and clarity rather than certainty and precision.

  • "Long-term planning is now very long-term. While there are exceptions to this new rule, crafting three-to-five-year plans seems fruitless for most organizations. Those who maintain their commitment to a longer plan do so for learning and clarity, not for certainty and precision."

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