Overcoming Your Fear of Rejection When Seeking Accredited Investors
Most people, including potential hedge fund managers have an innate fear of rejection. From an evolutionary perspective this fear seems to make a lot of sense. Get rejected by the tribe and you don’t pass on your genes and your lineage is wiped out.
But in the modern world, the fear of rejection can hold you back when starting a hedge fund. Unless you have people tripping over each other to give you their capital, you are going to have to talk to a lot of prospective investors to raise the funds that you need to launch your hedge fund, and the majority of them are going to say no.
You can let your fear of rejection hold you back or you can learn to overcome it by doing the following things.
First, make it your goal to get rejected by a certain number of prospective accredited investors per day. This completely reframes the problem from one of trying to avoid rejection to one of almost seeking rejection and not caring so much about it. When your goal is to avoid rejection you will end up making fewer calls on investors so that the chance of being rejected is lower. But when you are actively seeking rejection, you will be focused on making more calls. And as you get better at pitching your hedge fund you will find that you have to make more and more calls to reach your rejection quota.
Second, start small. Don’t pitch the $20 billion hedge fund that you have been salivating over on the first day. Start by pitching a number of small investors first. Focus on the prospects that you are a little more care free about first. If you land them, great, but if you don’t its no big deal. This way your fear of rejection is lower and you will have time to practice and refine your pitch.
Third, do the thing you fear everyday. If you fear being rejected by potential investors, you have to pitch your hedge fund to new prospects everyday. Your mindset toward selling your fund is like a muscle. The more you exercise it, the stronger it gets, until eventually you almost start to look forward to being rejected, because each rejection is a step closer to more capital for your hedge fund.
Fourth, another important mindset to have is that you can’t lose what you don’t possess. If a potential investor is not interested in investing, it is no loss. You never possessed their investment in the first place. So the way you entered the meeting is the way you left it. You haven’t lost anything, so don’t make their rejection to be a big loss. You’ve lost nothing except for a bit of time and you’ve actually gained something. You’ve gained a little more courage when meeting with investors that you can apply when you are meeting with a large pension fund or university endowment and you’ve learned a little more about things that may or may not work when pitching your fund.
Henry Ford once said:
Failure is the opportunity to begin again more intelligently.
Take this to heart. Review your last investment meeting. Evaluate what went right and what went wrong. Learn from each meeting and do more of what went right and less of what went wrong, and eventually you fill find that things start going right more often than they go wrong.
Fifth, learn to exit meetings gracefully. If a prospect has no desire to invest, do your best to learn why. Affirm that you accept their decision then ask them you tell you the reasons why they are not investing. Then listen carefully. Write everything down and use this to refine your pitch. This will take your mind off rejection and focus it on something that is much more constructive and beneficial to your fund raising efforts.
Sixth, replace the fear of rejection with a greater fear. Learn to fear regret more than rejection and your fear of approaching immense institutions will abate. Focus on the consequences of giving into your fear of rejection. Think of the millions of dollars that you will not be managing, the fees that you will not be earning, and the clients you will not be helping if you allow your fear of rejection to overwhelm you. Think of how you will regret not giving it your best in three years when you are forced to go back to work for someone else’s firm if you don’t face your fear of rejection and raise sufficient capital.
Remember, if you don’t learn to overcome your fear of rejection, your hedge fund won’t grow to its full potential. You might be the top hedge fund manager in the world, but people simply won’t know about it and they won’t invest in it. It is absolutely critical to face your fears, look them straight in the eye and overcome them to build a successful fund.