Minus Twenty Podcast Episode 6: Facing Investor Rejection (and getting back on the horse.)

Updated: Jan 22, 2020

One of CEO Keith Schroeder's greatest business regrets is not getting right back on the horse when his first restaurant failed. He went to work for others for 10 years before he got that push to go back after his own venture.

The answer you'll get often from the investment community is "No." For an entrepreneur with passion for their project, all of those "No's" can wear you down. And it's ok if you never get to the "Yes" with your first idea. You need to take that rejection, learn from it, then step back up to the horse and take another swing. Metaphorically of course, don't swing at the horse like Mongo.

You might have to reframe your entire business plan or your entire concept. Strangely enough, having too much confidence in your plan and execution can scare away potential investors. That sounds contradictory but as Keith explains, you need to be open to the areas of your business you don't know or need help with.

As you wade through the world of fund raising and investor pitches, you need to be ready for "No" and have a plan to move forward to get the "Yes" or move on to the next idea and start again. Keith presents some great insight on investor navigation and staying positive in what can be a long and exhausting road.

This podcast features High Road Craft Brands CEO Keith Schroeder and Walter Biscardi Jr., Executive Creative Director.

In addition to listening and watching the episode here, you can find Minus Twenty on most audio streaming services and YouTube. Full transcripts below.

Here's a link to Steve Blank's Four Steps to the Epiphany that Keith refers to in the episode.


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Full Transcript of the episode. Apologies for any typos.

Announcer 0:02

Welcome to minus 20. It's a journey of an independent food business.

Walter Biscardi 0:07

Hey, folks, welcome back to Minus Twenty. I'm Walter Biscardi.

Keith Schroeder 0:10

And I'm Keith.

Walter Biscardi 0:11

And today I thought, you know, in the last episode, we talked about raising capital. And at one point during the discussion, you said, you know, one of my biggest regrets was when I failed, well, you didn't fail, but the first company shut down, and you didn't get right back on the horse.

Keith Schroeder 0:27


Walter Biscardi 0:28

And so one of the hardest things about raising capital is rejection. I mean, you're gonna be rejected a lot.

Keith Schroeder 0:34


Walter Biscardi 0:35

So I thought maybe today we're talking about, you know, investor rejection rejection in general. I mean, that's a hard thing.

Keith Schroeder 0:41

Yes. And I think that if you start to measure on a percentage basis, the lion's share of the feedback that you will get from an investor or the investment community is "No." Right. So for percentage base of "No" is "Almost All" right. And so if that becomes your new set point, I think you then learn to go into the investor conversation with the assumption, the presumption that it's "No."

Walter Biscardi 1:16

we're Yeah,

Keith Schroeder 1:17

Without any emotional attachment to a possible "Yes." Because the stars need to align in an other worldly level for an investor to get to the "Yes." Unless, of course, it's a small family office and they, it's, you know, one person's money and they can operate at their whim. But very even very few family office investors invest willy nilly or impulsively, they typically will have some kind of documented process or strategy that they communicate with their family or attorney and they've got people to help gut check. What seemingly is one person's money and so, it it, I look back on that, you know, burying my head in the sand after closing the restaurant and go, Oh my God, I wasted so many at-bats feeling bad for the loss or the "No", when I could have been swinging and swinging and swinging and swinging. I'm at the point now in my life and career where I just like to swing. It's interesting. And, and so it may sound this may sound very abstract to someone who's not been through a lot of pitching or trying to raise money but as you do it, right. There's no checklist of "Why No?", right. It's just "We've dated and No. And good luck to you." and that can feel in the early stages of those at-bats, they can leave you feeling very empty, can leave you questioning your own decision to get into business, your strategy, whether or not there there's some self image issues that come along with swinging for fences, right where your inner voice goes, maybe you're crazy. Maybe this isn't meant for you maybe. Maybe this idea of greatness is is absurd. Maybe it's egotistical, maybe, maybe you should go get a job. You know, maybe you should stop putting people's incomes at risk that there are things that follow rejection that can haunt the novice. Then you get used to it. And when you get used to it, you should work really hard to respect and empathize with the strategy of the investment professional and go, what did I learn? What are five or six things that I learned from going through the process of pitching my business? That were a clear part of the "No"? Right? It may be that I'm in too many channels, or the investor doesn't have expertise in food service, and we don't, we don't think we can add value. Or, quite frankly, your management team doesn't seem strong enough to get this thing to, you know, X million dollars depending on the business. We think you sound impulsive. I mean, it could be anything. It could literally be anything. It could be, you're not adventurous enough. And we wanted to play venture capital and we want your vision to get to a billion dollars and your aspirations only to get to 100 million and we just don't, that's not what we do. And you will learn that there are so many different flavors of Why and How large sums of capital are deployed and invested. And it's, it's it's alchemy, and it's art, and it's science. And it's their strategy, not yours. And so it's it's going to be very rare that you tuck into neatly.

Walter Biscardi 5:18


Keith Schroeder 5:19

Someone else's investment strategy.

Walter Biscardi 5:22

Wow. That's a great. I mean, that's, that's a great overview. And I know there are people listening out there, and I was one of them where you've come up with this business plan, man, and you know, this thing's a winner. And if I know I can I know if somebody will just get me started.

Keith Schroeder 5:38


Walter Biscardi 5:38

Right. We're gonna make a lot of money for a lot of people.

Keith Schroeder 5:41


Walter Biscardi 5:42

And the first time, yeah, not too bad. Second time. All right. By the time you get to that 10th "No," you're like, Okay, maybe this is not what I think it is. So what, what, let's start there with what? What should that person be thinking? Okay, I've got my 10 "No's". I've got my 20 "No's" I'm starting to doubt myself. How do you kind of you evaluate what you've got? You evaluate what all of these people are saying, I mean, what's your thought process at that point to get yourself moving forward?

Keith Schroeder 6:14

Yeah. So I would encourage the the entrepreneur to to consider reframing. Okay. And that reframing is don't doubt yourself. Question, your business model. Okay. Don't communicate to the investment world, here's this plan, and I have absolute confidence, guys, gals, that we'll all get there. That almost invariably is never reality. Right? There's some ebbs and flows and so you have to present yourself as an entrepreneur with a particular level of expertise, a particular vision. But you have to present a series of possible outcomes, a series of possible approaches. And when you are rigid in your self confidence, it usually makes the entrepreneur seem naive, right. So when you engage in the point counterpoint with the investor, and there's and they're trying to get you to poke holes in your own ideas, they're doing that to see if you can navigate what will invariably be a very turbulent marketplace. And so, companies in today's day and age and you see I believe that the that the knowledge surrounding all of this or the subject matter that evolves over time was pioneered by a guy named Steve Blank. I talked about his his book that's available online for free as a PDF called the Four Steps to the Epiphany that influenced the Lean Startup movement and the idea of pivoting and shifting and all the cliches that have evolved relative to entrepreneurship. But it is a truth that an entrepreneur should approach the potential investor investment thesis with the idea that not only will their business change, but they will too. Because think about it, I'm investing when it's all said and done. I'm investing in the in the person, right. So if I get a sense that you're overconfident and rigid, without any knowledge of the possible variables that could knock you over, I lose confidence that my money can even be recovered. Right? If I say this person's resilient, they are wanting to do a broadcasting company they wanted to focus on cosmetics, for the trans community because that's becoming a thing or cosmic male makeup. Sure right makeup for men's becoming more acceptable by the day and they're like it's a thing. It's a trend. There's 10 million men on Instagram. You know male makeup is the future. And what if it's not? What if it stays really niche but you get great at makeup and what you get great at his makeup made by mushrooms, and I saw a mushroom makeup product on the shelves in Whole Foods yesterday there was like a little shimmer stick and I thought that's fascinating, right? Somehow there's a little metallic flecks and the base of that has dried mushrooms in the in the base.

Walter Biscardi 9:39


Keith Schroeder 9:41

But it's on the shelf right and it's a cool product and someone thought well enough to have the product that it's ended up near the checkout counter, which means it's probably selling through. There's no way that's not a shift that wasn't someone's original idea. I'm gonna make a shimmer stick out of mushrooms and everyone's life will change. Okay, kids, that's how I'm going to feed you. It's you have to be the kind of entrepreneur that someone looks at and says, on their journey connected to their passion for fashion, food, makeup, you know, electronics, whatever it is. They're going to ride the wave elegantly, right? I think oftentimes, they use the analogy of big wave surfing because that's what entrepreneurship feels like often, you know, those guys that they take out on the on the on the helicopters, and they just drop them into a gigantic wave and then they break their back and do it again. I think that's a wonderful analogy, metaphor, whatever you want to call it for, what it feels like to start and try to achieve an exit or a or a sustainable situation or build an enterprise something that provides recurring income for a lot of people. It's big wave surfing, most of the time you're going to fall and it's gonna be an inelegant result. But the times that those big wave surfers actually ride their way out of the wave, it's exhilarating to watch as an outsider and you want to champion those people like you guys are amazing, right? But it's probably very satisfying internally for that person who's been studying, surfing has been studying water, who's who, who feels it differently. And when they make it out, I'm sure it's a very soulful sense of centeredness, I'm sure because there's a hands on connectedness to the wave the water physics and and perhaps there's a physics to survival in, in entrepreneurship. And so I think they think about that not not that you get into matters of philosophy with investors, but it does. It's absolutely critical to train yourself to be flexible to what the market is asking for from the thing that you've started. And it might be radically different than what your original vision is. And if that makes you uncomfortable, you're probably not going to earn an investment.

Walter Biscardi 12:28

In fact, that whole riding wave is it excellent analogy from somebody who was an entrepreneur and as a sidebar, great documentary called "Riding Giants."

Keith Schroeder 12:37

That's really cool. Yes,

Walter Biscardi 12:38

Actually that shows exactly what Keith is talking about. I thought one thing you mentioned, it's actually very interesting. You talk about almost having an overconfidence like, like what I said, You know, I know this is going to work this way it's going to be did it it actually turns off an investor now me coming to an investor, I would think that this self confidence is what they want to see. This guy knows what he's talking about. And he looks like he's going to execute it and But you're saying that actually could be a detriment?

Keith Schroeder 13:02

I think it's almost always a detriment unless you have Muhammad Ali level skill at what you do. If you aren’t the defensible best in the world that the thing you're better off taking the humble path 100% and

Walter Biscardi 13:17

So what would that look like? I mean, I'm kind of curious why I come to you as the investor and I'm presenting What did that look and sound like?

Keith Schroeder 13:25

So, I'll use High Road as an example. I might, I might, you know, someone might say, Keith, what keeps you up at night about this business and the overconfident person is like Nothing. We've got this we've get we've become expert and all the avenues of frozen food distribution. And our brand is the best bar none and be like, well, it's ranked 197th behind every other ice cream brand, except this one that had a gigantic recall and killed 42 babies, but you go on with your confidence pal and good luck, right? And they're gone. It's over. But if what you say is, my goodness we were spectacular at. We've did we've, we've observed that we are spectacular formulating products. And we've figured out how to make them in small scale really beautifully. But when it came time to integrate sophisticated food industry, food manufacturing industry equipment, the learning curve was really steep. And so right now, I think that we lack a leader with expertise in manufacturing. So we're a bit rudderless right now, even though we're figuring it out as we go. I bet we’re wasting more money than we would if we had a manufacturing expert on our team. And then that investor goes fabulous. We've got a guy. That's how we can help. What else keeps you up at night, Keith? Well, my goodness, we're here. We're based here in Atlanta, Georgia, and in the summertime It gets hot here. And so when you're moving pallets of ice cream from one place to another, there's heat shock. And I really didn't think it through and we built this facility and we need a frozen holding area when we're transitioning product to the truck. And we don't have a frozen or refrigerated dock area. So we have to move really, really fast from the dock to the truck. And I think that leaves us vulnerable, right? And so to be conscious of the areas where you need to tweak yourself to become progressively better, I think shows the investor that they can deploy capital in a way that will help you solve those problems that you're identifying because you're the one running the business in the trenches. They're not right and so they're asking themselves can we not only invest in this business, but can we trust this person to deploy this capital in such a way that their business reality continues to improve, improve, improve Improve, improve, right? And if you present yourself as I need money because I'm a genius, and you know, I spent all this time being a genius, I just don't have the money. So once you give me the money, we're I mean, we're good to go. I mean, why haven't you sent me money already? What's wrong with you? So it's humility, right? It is. to a large degree, you don't intend it to be but a lot of the times that I've sat down with potential investors, it feels somewhat like therapy session for startups.

Walter Biscardi 16:29

You just get on the sofa?

Keith Schroeder 16:31

Yeah. I'm gonna lay down now. I'd like some chamomile tea. A massage.

Walter Biscardi 16:39

Might be a bit much. Is there? If you're starting to get like, let's say you're up to number 20, number 30. And you are starting to feel like all right, I don't know what to do next. I mean, and I don't want to say there's a point at which you give up but the thing that that you just because if you really believe And you know, it's a good product. And like we said in the last episode, there's a lot of great ideas out there. Where do you look, you look at your pitch, you look at your presentation, do you look at the business model? At the point at which you're like 30 rejections, what should I be looking at now before I go to the next investor,

Keith Schroeder 17:18

Brain, dump everything that you've learned, okay, from, hopefully you've taken good notes, brain dump everything. I like to use Mindjet Mind Manager, the mind mapping tool, pull everything and put it into buckets. Right? And you'll find, excuse me, that there are recurring themes that are leading to the rejection that might be complexity of the channel strategy. It might be product quality and consistency issues. It might be there's a maybe a lack of professionalism in the in the brand and brand identity. Not everybody is as lucky as me and marries a brilliant designer, right? So you might be an entrepreneur who did your best and you hired a student from the Art Institute to do your first logo. And it's okay, but it doesn't look sophisticated, right? That might be a recurring problem. So the brand isn't really grabbing the investor. It's not a disjointed list of catastrophic issues, right? It's usually a couple of thematic things that you need to mature about yourself. And a couple of things thematic things you need to mature about your business. And then you then you then you prioritize those and say, Okay, I'm going to dig in, and I'm going to invest my my remaining capital in a brand refresh, right, but you keep going and you keep going at it and and if you if you do that brain dump, categorize, review, reflect, act. You do that as a loop over and over and over and over again, the likelihood of the business failing is close to nil. Now what you have to be careful is not to allow status quo in your business during those moments. So if you get a bunch of feedback and that feedback is accurate, and in the end the financial reality requires you to dial your business back to you plus your dog. Fucking do that that day, right? You can't, but I don't want to fire Bob. Bob's been loyal to me for a long time fire Bob fucking now.

Walter Biscardi 19:38

Sorry, Bob.

Keith Schroeder 19:39

Bob, you're gone, dude. You have to because otherwise, then you're not you're not equipped to iterate, you're done. Okay. You're done. And it has been deeply uncomfortable in the moments in time and by the way as a CEO as as a leader of a business you will disappoint people that you've hired along the way and you will be proven to have been somewhere between inaccurate and a big fat liar many times along the way it's not because you intended to be it's because you tripped up you fell you failed you got sacked it's third and 47th

Walter Biscardi 20:26


Keith Schroeder 20:28

But you're still the quarterback so you have to right, you do you have to call the play you have to call the next play and sometimes the next play is see ya Bob. and maybe it should be see you Walter. See you Keith right. Maybe you should fire yourself. Right? Which is a possibility right? It's not uncommon in a businesses lifecycle that the CEO realizes I keep calling plays, and they're the wrong one. So I'm going to bring in someone to replace me

Walter Biscardi 20:58

Just look at the business headlines. Every single day, right,

Keith Schroeder 21:01

Right. Look, look at what's happened with Uber. Right? You've got the new CEO came in. Sure Travis made all the mistakes in the world that engaged in a kind of douchebaggery that was offensive to the typical board of directors. But when it was all said and done, he still was the spirit of Uber and I read an article is kind of predicting that we may have another Steve Jobs esque situation on our hands where immature over calibrated roguish entrepreneur gets ousted from his business. Uh Oh. We kind of need roguish immature, outlandish thinking in this business by virtue of the fact that the business model is super super disruptive and maybe we need someone who's a little bit crazy cakes to be the king.

Walter Biscardi 21:51


Keith Schroeder 21:52

It's weird. It's a those are hard decisions to make. I think. Oftentimes you hear the word business and people go business equals serious responsible buttoned up bullshit. Business is whatever is required to keep customers happy, showing up.

Walter Biscardi 22:09


Keith Schroeder 22:09

You know, engaged and I'm sure that's different for a strip club than it is for a pharmacy you know what I mean. Different business models require different leaders.

Walter Biscardi 22:21

Not that we would know anything about strip clubs. I mean, Elon Musk is a great example of that. I mean, he disrupt every single day.

Keith Schroeder 22:29

For sure. And I think there are times where, what he wisely kind of pokes the marketplace in the eye, and it effectively keeps his brand and business top of mind.

Walter Biscardi 22:42

Yeah, yeah. So now we're kind of off topic a little bit, but any, I think you've given some really good advice, really good information on taking rejection. Well, I mean, and keep in mind, it's never personal. It's always business. Always the model. I mean, maybe there could be a little bit of personal in there just in the sense that they don't feel comfortable with you giving you the money, which is what you're talking about.

Keith Schroeder 23:08

Almost always. Right there. It is a little bit personal.

Walter Biscardi 23:13

I take it back.

Keith Schroeder 23:15

It is. I think everything is. And it's there been times where I've been rejected by people who I really wanted to do business with. And they when they start with, Look, man, we love you, but, you're like need to brace yourself in the gut, like, here's my brain dump list being provided for me very efficiently because the guy respected the process and the time we spent together enough to tell me three or four things that I need to get my ass to work on. Sometimes they just let you go.

Walter Biscardi 23:49


Keith Schroeder 23:50

and then you have to sit and ruminate and wonder. And so consider it a gift if someone tells you precisely the reasons why they've decided to walk away. And the nebulous language like we just can't get there. Like, where is there? I suspect that has something to do with a wire transfer or check or legal documents where we are in love. So I guess it's not happening.

Walter Biscardi 24:15

We'd love you. But we're not giving you any money. Any last words of advice for those people listening who are raising money and going after those investors?

Keith Schroeder 24:25

Yes. Keep it going. Don't Don't quit. Reframe, regroup, make all the decisions required to, to never quit. Actually, I think there's merit to that if if your business needs to be done, let them kind of carry you out of the building. You know, let someone come along and go, Hey, Hey, bud, it's over. But just keep keep keep fighting until that day happens, and you'll find that That the days unlikely to happen if you stay at it and iterate and then and then lastly, I can't I can't champion the work more than Steve Blanks, Four Steps to the Epiphany and the processes that he recommends. I think that that work will prove to be some of the most timeless thinking, relative to entrepreneurial thought, and it's out there for free.

Walter Biscardi 25:24

Yeah, yeah. And I showed you a picture of it. First thing Keith made me read when I joined the company. It's very interesting read. It is very, extremely. Well. that's it. To help you trying to get through your rejection. Just keep at it. I'm Walter Biscardi.

Keith Schroeder 25:39

I'm Keith Schroeder. And if you need a hug, just reach out to us and we'll tell you to keep it going.

Announcer 25:46

Thanks for joining us here on Minus Twenty.

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