As a writer, you are kept in the dark and you have to deduce what literary agents really mean. Does "not right for my list" mean "eh, I'm not interested in this type of story" or "you can't write worth crap"? When one agent told me "you're clearly a very talented writer" and another said "I admire the quality of the writing and the execution", do they mean that? Or is that simply a form rejection that everyone gets? There's really no way to tell.
Discouraged, I recently began submitting to a handful of small presses instead of directly to agents. Being signed by a small press has its ups and downs (generally you don't get an advance, and you get less publicity than with a large press) but I figured, what the hell. I'll give it a try. The worst they could do is reject me, and by now I'm used to that.
I just got the most beautiful rejection letter back from a small press. Here it is, in part:
I enjoyed your chapters, but this isn’t the kind of text [our press] is interested in. That is, we are committed to publishing excellent work that, given the current publishing milieu and market, is unlikely to be otherwise published.
Your writing, and what I imagine of the whole book from your description, on the contrary, is much in demand, consequently much wanted by regular publishers.
I would send the ms around to more mass market houses than we are, and agents that list “romance fiction” as what they’re looking for. I think you have a good chance of getting this book published in a marketplace far larger than literary fiction.
So I guess maybe I was a little off-base calling this literary fiction with romance elements…I submitted to nine new agents who specialize in romance and general fiction, so we'll see what this yields. All in all, the best rejection I could have gotten: one that lit a fire under my discouraged ass and got me to keep going. Onward!