How to decline funding offers without burning bridges

For a startup looking to scale, funding offers are almost like gold dust. However, it may not always be how it seems. Bigsmall.in co-founders Yatin Hans and Aman Hans share their wisdom and experiences about funding offers and why and how you should not take every funding offer – it may not be what your startup needs at a given point of time.

For a startup looking to spread its wings, it’s almost unthinkable to decline a funding offer, especially given how a funded startup is perceived to be a successful startup in the current climate. However, this is simply untrue. There are innumerable examples of funded startups failing to lift themselves off the ground, whereas there is a similar amount of success stories of bootstrapped startups. Every business has different requirements at different stages of its growth – funds may not always be what you need at a specific point in time.

Recognize where the investor is coming from

When you have a funding offer, it is important to know and note whether the investor is on the same wavelength as you. It is a must that moving forward, your investors have the same long-term vision of your company as you. If not, you could severely alter the brand you wish to be for your customers. You must ensure that what sets you apart – and your touch in your brand – must remain constant, which may be difficult to do with an investor, and their vision of your brand, on board.

Initially, it may be hard to reject any advances from investors. It is an extremely positive sign that investors are showing their confidence in your startup – that is an indicator that you are doing something right. However, funds are not the be-all and end-all, especially not in the initial stages. Funding, at the start, might be a lucrative option for the short term, but to create the company you want to, you have to take a step back and take a look at the bigger picture rather than taking the first investment offer you get.

Keep your focuses right

When you’re only kicking off, the focus should instead be on becoming profitable and keeping your startup afloat. Funding will help more so in growth than lubricating the metaphorical engine of your business and keeping it running. It is important to first establish the philosophy and processes before you need funding. Funding, of course, is vital to every business, but it’s important to know whether you’re at that stage where funding is what you need to take your business to the next level or not.

Never burn bridges – always keep space for water under the bridge

If you’re sure that a certain investment offer is not the right course of action to take for the long-term future of your company, the next part is actually saying no. Naturally, human nature finds it difficult to say no, especially when it’s an offer which, on the face of it, is extremely lucrative financially. It is also not the most prudent idea to outright say no – it’s key to not burn bridges in the process of refusing an offer. You should never wind up an investor when you say no. It’s always pivotal to cultivate positive professional relationships with as many investors as possible – regardless of whether or not you accept their offer.

In business, you can never say never – there might come a stage where your startup might need that funding offer. Even if not, you might go on to form another business partnership, or might require something else from the same investor later down the line. The business world is getting smaller and smaller, and you can never have too many friends in the right circles.

The right way to decline an offer – be honest

We believe that the best way is to just be up-front – instead of ghosting, or concocting up a story, let the investor truly know why that offer is not the best course of action for your company at that point of time. Let them know where you were, where your company is at the present instant, and how accepting the funding offer at the moment may not lead your company where you envision it to be after a certain amount of time. To cultivate a positive professional relationship which can bear fruit in the future, you must maintain the inherent trust factor with the investor, going forward.

At Bigsmall.in, we’ve been extremely fortunate to have had a fair share of funding offers. However, instead of outright refusals, we sat down and explained to the investors why their investment offer is not what we require right now, what we envision our brand to be, and our plan to take our business forward, to a stage where we would require their funding offer. Not only does this help in pushing towards a fruitful association in the future, it helps to remain in constant touch with the investors. This, in turn, increases your value for future investments – to this day, we are still in touch with certain investors who give us regular consultancy, insights, and feedback.

Always avoid ghosting – it is the absolute worst way you can refuse a funding offer. It is nearly impossible to form a positive relationship in the future after you ghost someone, keeping your pride intact. Don’t make up a reason either. Remember, there are a lot less fish in the water than you’d think. Instead of taking the cowardly way out, be sincere, stick to the facts and the data, and rationally explain to them your thought process.

Even investors are rational, logical human beings – if you’re honest, they will understand your rationale behind your decision, and establish a trust factor for the future. Thank them for their interest and for their time – it could be extremely valuable later down the line.

Yatin Hans is the Founder of the online creative gifting portal Bigsmall.in.

(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)