With how ubiquitous it has become, it is hard to believe that a successful company like Airbnb started out by facing outright rejection.
When looking at those early rejection emails published by Airbnb co-founder and CEO Brian Chesky, it seems even harder to believe that some investors considered the potential market opportunity “not large enough” or that it was an area that they could not “get excited about”, while others simply did not even reply. But, it is clear from its growth and current status as a multi-billion dollar company that such rejection did not stop them from developing their idea. They had confidence in their startup, knew what market they wanted to target, and felt there was a problem there that could be solved.
In general, all startup founders are simply builders trying to solve a problem. They are usually trying to build something brand new and against the odds. As a result, these founders constantly end up hearing “no” or “it can’t be done” from those around them. Facing such rejection is difficult, so we find that most founders avoid these “No’s” and purposefully seek out those who will give them a “Yes”. But, rather than try to avoid the problem altogether, founders need to get used to the idea of rejection. Not only are they going to continue to hear the word “No”, but they are also going to find that they can learn from those “No’s” for the sake of their companies.
Understand Your Biases
Actively trying to avoid “No’s” is not surprising behavior, and we certainly see this often. It is driven by biases that most founders have. In fact, there are three common biases in particular that stand out when we talk with founders: (1) the Dunning-Kruger effect; (2) Confirmation bias; and (3) the Halo effect (particularly of customers or stakeholders who agree with the founder).
Not seeking expertise and insights
First, the Dunning-Kruger effect can be defined as a cognitive bias where people might overestimate their own knowledge and expertise in a particular field in spite of their limited competence relative to others around them. It is imperative that founders look at a variety of areas from marketing to pricing to product development when developing their company, so it is natural that there are some areas that they lack expertise in. In such instances, it is best for founders to acknowledge this and instead seek help from those with the necessary knowledge to make the optimal decisions for the company’s future growth. Of course, acknowledging that one needs help can be difficult for anybody, leading to many instances like the Dunning-Kruger effect where founders can overestimate themselves and struggle to solve their own problems.
Seeking feedback that agree with their views
Another common bias among founders is confirmation bias, which is their tendency to search for and interpret information in a way that confirms their prior beliefs. This can happen when founders look for validation by seeking “evidence” from those who are willing to accept and praise them, causing them to stubbornly stick to their own ideas rather than explore new ones.
Creating perception errors in decision making
Finally, the halo effect is the tendency for positive impressions of a customer or stakeholder to positively influence one’s opinion or feelings in other areas. No matter how great a customer or stakeholder may seem, founders should not blindly trust and agree with whatever they have to say because it can lead them astray. All of these biases are part of a founder’s natural defense mechanism and response system to be able to cope with future rejection. What is most important is that every startup founder can acknowledge that these biases exist so that they can avoid them or at least prevent them from influencing their decisions.
Actively Seek Your “No’s” To Work For You
But, there is also a lot that startup founders can learn if they actively seek these “No’s”, especially for companies in their early stages of growth. For some Product teams, they call this “dog fooding” to discover everything that is wrong with their product. Looking for these “No’s” can help companies understand where value exists and where it doesn’t, ultimately helping them improve their product. Yet, when it comes to the value proposition, pricing, and offer, we don’t do it as much despite how much it can help to do so. Similar to product development, if founders seek out these “No’s” with regards to pricing, they can discover what their customers’ value assessment is and shape their pricing strategy accordingly.
To seek out these “No’s”, there are three different approaches you can take. First, it is always important to understand who your customer is and what they value. Sometimes, founders discover that there is no market need for their product. This can partly be due to the product itself but also because the product failed the “worth it” test: is the product right for this customer at this price and offer? Using this test to seek out “No’s” is important so that you can re-evaluate who your customer is, whether you have set the right pricing strategy for that customer, and whether you are selling the value of the product. At the end of the day, your customers must believe that your product is worth the price. This focus on value is important so that you can design your pricing based on what your customers are willing to pay and what exactly they value most. If your initial pricing strategy faces rejection from your target market, then it is clear that improvements can be made and a better understanding of your value drivers is needed.
You can also experiment with who your product is for and use customer ring segmentation to discover the various groups of consumers that will actually respond to your product. While you may have a specific group of customers in mind, it is important that you do your research with market testing and collect results that support your hypotheses. Otherwise, if you find yourself facing rejection from a group of customers, you can recalibrate and focus on the target group who would respond well to your product. Discovering exactly who your target audience is and ensuring that they are aligned to your value will create loyal customers in the long run.
Finally, you should focus on experience and whether your customers actually understand the value of your product. If your research through testing, surveys, and analysis shows you that they do not understand your product or how it acts as a solution to their problem, then you are not communicating its value properly. As a result, it is inevitable that you would face rejection since they do not see the product the same way you do.
Final Thoughts
In conclusion, it is natural for any startup to face rejection one way or another. Rather than ignore it or avoid it, founders can learn a lot from acknowledging them and spending more time trying to understand the root cause of such rejection. If customers and/or stakeholders are saying “No”, then it is your job to figure out what they are saying “No” to and why. Simply doing that can help you improve your product, develop an optimal pricing strategy, and set your company up for sustained long-term success.
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