What I've learnt is that rejection is part of a process, and what initially seems the end can be the beginning of the next step. Yes, the application was rejected. But as the letter from the funder said, it was an achievement to reach the shortlist. For me what made a big difference was that the letter also gave me some constructive feedback- that the application had strengths but that one aspect needed to be stronger. That feedback helped in two main ways: it enabled me to recognise the strengths as well as the weaknesses in what I'd written. And it encouraged me to learn from the experience and to think about how I might improve it next year.
Receiving criticism is rightly an important aspect of doing academic research, particularly when writing for publication or research funds. For me, the key thing is how to turn that criticism into a forward trajectory, and not to become disheartened or to dwell on the deficits. And sometimes, a few words on a rejection letter can make all the difference.