Top image: Grand Theft Auto V
Sure, getting a rejection letter from a publisher or investor can be heartbreaking. But it can also provide you with invaluable feedback. Where did you drop the ball and what was missing from your pitch? Rejection does not mean the end, it’s the starting point of doing better next time.
Angel investor Joakim Achrén has written around 300 pass notes last year alone to founders who have been seeking money. He has bundled twenty of these rejection letters in an ebook with the purpose of giving insight into the thought process of investors. The ultimate aim is to help founders put together a viable pitch that has a chance of succeeding.
“By learning from your rejections and carefully analyzing the feedback that you receive, you can get closer to achieving your ultimate goal of securing funding”, says Achrén. “Whether adjusting your pitch or finding a more investor-friendly product, you can use rejection to your advantage in many ways. So don’t be disheartened by investor pass notes – use them as fuel for success.”
Check out three of the pass notes below. And get the free ebook here.
Missing key personnel on the team
After going through the material and spending time thinking about the case, I’ve come to the unfortunate conclusion that I will have to pass on this opportunity. But don’t worry, you’ve made great progress on the concept, and the metrics look promising. I see potential in this genre.
That being said, a technical co-founder is necessary for building a successful and scalable business in this space. So while I can’t invest now, I’d be happy to revisit the possibility as you continue to go forward. Keep up the good work – you’re off to a strong start!
Joakim Achrén: “It can be a CTO, a game designer, or sometimes the founders haven't figured out who the CEO is. I know that it might be hard to convince people to join before you have secured the funding, but many will commit to joining full-time once there's cash. You just need to cast a wider net and be convincing.”
The problem is the Cap table
After reviewing everything, I’ve concluded that I won’t be pursuing an investment in your company. Let me share the reason: Although I like what you are working on, and your take on the genre is interesting, the problem here is your cap table, where investors already own a majority of the company. One investor owns 40%, and then you have two angels who own some 14% together. This means that the staff and founders own less than half of the company.
If the company had been highly profitable and growing, then this wouldn’t have been such a problem. But since you are still very early, you don’t have a product market fit, and you are exploring something new and innovative, the road will most likely be long and arduous. The staff and founders need to be motivated from owning a majority of the company. Most likely, based on my experience, a company like yours will need to raise additional funding down the line to launch and market the game, let alone grow it to tens, or hopefully hundreds, of millions. With those additional rounds, the founders’ ownership will dwindle even more. I hope you find ways to fix the cap table. If that happens, please do get in contact with me.
Joakim Achrén: “You've given 50% to investors and still haven't reached product market fit? Or there might be co-founders who've left and taken the shares with them or passive advisors who own lots of shares. It's key for early-stage investors to see a cap table where founders own a majority, have control, and are motivated owners.”
Project doesn’t differentiate enough
I spent lots of time thinking about this, but it is, unfortunately, a pass. Reasons: I see that merge2 is extremely competitive, and my syndicate and I already have several companies tackling this genre. I didn’t see any KPIs pointing to the fact that your game would become the merge2 winner. The ideas and innovation you are proposing are great, but it would require proving before I’d be interested in pursuing an investment into this competitive and very risky genre.
This will help you move forward. Happy to share more feedback and elaborate on these if needed.
Joakim Achrén: “The me-too gaming has been rampant on mobile, especially in 2020 and 2021 when merge was hot. I was expecting lots of interesting twists to the merge2 core, but none have yet emerged. People can claim a differentiation, but proof points that it works are quite often needed.”