Don’t get discouraged
So the pitch went great, lots of good discussion and Q&A, but still no $...what happens now? Firstly, don’t be put off by a VC not investing in your idea --there are many, many reasons why this happens. Please don’t assume your idea sucks; at the same time, also don’t assume they don’t get it--the fact is, you can’t kiss every girl. VCs (should) only invest in things they can really add value to--so if they don’t understand your technology or haven’t personally built a business in that space, chances are they wont want to fund it because they cant add anything beyond mere $.
A little known fact, VCs love to learn--why did they listen to your pitch if they didn’t really understand the space? Because you can teach them--in return, they will teach you. They will spend some time with you helping you find the right VC through their network, if you seem to have a solid idea. Furthermore, if they do understand the space generally, they will often spend a long period of time helping you iron out the kinks in your plan. I know of one company that Dado spent almost 18 months with before ultimately funding. Some companies take a lot of work before they are investible. This is a really good piece of the ecosystem--now, many entrepreneurs from other places don’t realize or believe how much time a valley VC may be willing to spend to nurture a potentially great idea. So, here is a story--some chip guys came up with a very high risk concept pushing the chip performance envelope almost to its theoretical limits. They were pretty well qualified to do so but while their chip design knowledge was great, their market knowledge was poor. So a very well known chip investor spent about 9 months working with the team, almost turning them into EIRs and letting them work closely with the rest of his team to flesh out their concept. The company was probably 3 months away from being investible, but at that point they secured a term sheet from one of the top 3 firms on Sandhill rd, not well known for syndication of deals--they took the money & ran (per good advice ;-) but failed to get the original VC dialed into the deal--very, very bad...). One of my own companies in the optical space had a similar history where one of the founders had leveraged actually 3 different, small VC firms for almost a year before getting funded. I found out about the history about a year after that and set about mending fences, but hard as it is to believe entrepreneurs are stupid enough to leverage this help and then dump the VCs in favor of another, the emotion is a lot likely being dumped for a prettier girl, and it leaves pretty nasty scars, too. Now, this ususually is a byproduct of heady times of rapid market growth--in poor economic climates, it's far more common for VCs to band together and prefer more people at the table to share the risk.
Getting turned down isn't the end of the world--in fact, let's turn it around to the VC getting jilted by the entrepreneur. In the case of the chip company, the dumped VC now had a very clear perspective of the space and knew what he felt was wrong with the team’s original idea, so was in a great position to evaluate the next 4 groups that pitched him for the same concept and thereby selected the optimal competitor who is now making the original team’s life hell...fun, isn’t it. Every no from a VC is an opportunity to learn. Make sure you ask for a debrief--VCs are optimists and they live by relationships. They want to invest the $ they have; they will work with you to make you investible if you are patient, honest, and have fundamentally a good idea. The more honest they are the more it can hurt, but make it easy for them to be honest; otherwise, all you’ll get is “love the deal, but we are not doing any more in this space.”