Contests are an excellent way of receiving feedback. Not winning can make accepting that feedback hard to take.
You’ve bent over backwards to polish your work for a contest entry. It’s taken time and effort, re-writing and polishing your work to make sure it fits the contest rule requirements but you’ve done it. When the results of your efforts fall short of the mark and you don’t win, or even make it past round one, it’s very disappointing.
What next? Everybody’s different. Me: I’ll need a bit of time to sulk, remind myself it was an exercise in self-improvement and learning, then get back on that horse and ride some more.
Also, and most importantly, it’s time to take the next step in your writing journey. I have two manuscripts in progress at the moment. I will choose between the two and decide which to finish writing. (Gotta have a finished product to get anywhere with it.)
My next step will include finding an editor who will work with me on that finished manuscript. Unless I win the lottery sometime soon, I know I won’t have a limitless amount of money to spend on a professional editor. That said, an editor will likely take me to the next step in getting an agent and/or a publishing contract. Here’s hoping!