33 ms·

Ways a VC says no without saying no

383 points by RobbieStats 9y ago

AndrewKemendo 9y ago
These are all still pretty fast No's in my experience. The worst No's are the ones where they ask to do Due Diligence and then never open the dropbox folder. Or if you are on your fifth meeting and they just keep trying to pump you for competitive information. So how do you know when you get a Yes? When you get a wire or a check. That's the only way. Even a signed note or Equity docs don't mean anything until that money clears. The best No's I've had were from Bessemer and a16z years ago. Almost immediate and right to the point that they wouldn't invest, with specific reasoning/metrics behind them. A++ would get told no again.
- deleted 9y ago
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- fao_ 9y ago
  > The best No's I've had were from Bessemer and a16z years ago. Almost immediate and right to the point that they wouldn't invest with specific reasoning/metrics behind them. Don't you mean "without specific reasoning/metrics behind them"?
  - cbhl 9y ago
    I think they're saying the "no" had specific reasons and metrics for the no.
  - kornish 9y ago
    He's saying that they made a decision, then explained the reason for their decision. That's the best possible way to receive a No as a founder.
  - yebyen 9y ago
    I don't think so, I think it says he was really pleased with the rejection (and that could have been because it came with actionable feedback, like reasons and metrics.)
  - mtgx 9y ago
    I think a comma is missing: > Almost immediate and right to the point that they wouldn't invest, with specific reasoning/metrics behind them.
- komali2 9y ago
  >Almost immediate and right to the point that they wouldn't invest with specific reasoning/metrics behind them. Was going to comment on the article itself: You shouldn't walk away from a VC without this in hand. Kind of a general sales concept - never take "no" without a good reason.
  - patio11 9y ago
    A related sales concept is forcing people to say no, even if you don't get a reason for it. This is why some very effective sales folks will follow up essentially forever until they get a definitive answer. It looks like crazy behavior if your mental model is "I brushed him off twice, clearly that is a constructive no, why can't he take the hint", but the rep's mental model is "I close deals all the time after the 18th unanswered followup. If I haven't gotten a no yet, there is insufficient evidence to exclude the possibility that e.g. they're just busy."
    - greenshackle2 9y ago
      That's why when I'm not interested or trying to cancel something I always give a content-less, irrefutable reason. If you give a specific reason, they will challenge it. "No, I don't want this product, because I'm not interested." "I'd like to cancel this credit card, because I don't want to have this credit card anymore."
      - enraged_camel 9y ago
        I've lied to pesky sales reps and telemarketers and told them that I've been diagnosed with terminal cancer and have six months to live. That ends the conversation pretty quickly and they never call back.
        bigiain 9y ago
        "Oh, I'm so sorry Mr Enraged_Camel... Perhaps I can interest you in a new unsecured credit card with a $25k limit?"
      - 9y ago
- tptacek 9y ago
  Came here to write the same thing. This needs about 5-10 more "No" variants that all include the words "yes, we're excited to move forward with you, and...". I'm not sure we ever got a VC to give us one of these waffling "no"'s without apply serious pressure.
- jessmartin 9y ago
  > So how do you know when you get a Yes? > When you get a wire or a check. That's the only way. YES to this.
- brightball 9y ago
  > Or if you are on your fifth meeting and they just keep trying to pump you for competitive information. 15 years ago after the funding I'd arranged to start a company fell through after about a year of travelling to raise it...we finally went to a VC. He insisted that he could not sign an NDA because of the precarious position it put him in hearing so many of these pitches. At that point we figured, this was basically our last option anyway so we gave him the pitch. He really liked it and wanted a local company to build it that we weren't comfortable with, so we parted ways. 5 years later I found out he had the company build it about as well as he could from memory of our pitch. It had plenty of flaws but it was a company that ended up selling for several million. As far as I can tell, it was re-sold and the company had a complete shift of focus afterwards. Meanwhile, in NY 2 years after my meeting with the VC an enterprising group of people who were not affiliated with that VC at all pursued and built a business out of one of the core features of my original platform. As it turned out, that feature stood as a business on it's own. I'd included it in the overall system because as an integrated feature, it facilitated a lot of efficiency gains. My platform was a comprehensive information system for public schools designed to make it easier for teacher's to focus on their students, reduce their workload and make it easier for them to communicate directly with parents. As a part of that system, there was to be a market place for teachers to sell and exchange lesson plans. This was back in 2003 and now smaller companies have popped up doing various parts of what our original plan was for. In NYC, Teachers Pay Teachers has made a business out of that aspect and for what it's worth, I'm really happy that they have been successful. The whole experience was really eye opening and I've been extremely reluctant to pursue funding for any of my business ideas because of it. I wish that wasn't the case.
  - germinalphrase 9y ago
    I find TPT interesting and - as a teacher - have a strong interest in platforms that could help debalkanize curriculum and support materials; however, it's always seemed to me that the marketplace model (while a successful business) must limit both the amount of teacher engagement as well as the type of teachers/materials present on the platform due to the incentives involved. Because of that, it's never seemed systemically useful. Did the platform you built attempt to create a shared curriculum libraries? If so, was the focus on the school, district or national scale? Happy to take a response via email so as not to derail the thread (see profile).
- wfunction 9y ago
  Is a check really fine? I presume if a VC is willing to give so many other things and renege on them then he might well give a check that bounces too?
  - rcfox 9y ago
    I'm pretty sure it's illegal to write a cheque you know won't clear.
    - deleted 9y ago
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    - wfunction 9y ago
      Oh wow, I didn't know that. I thought a check was a permission to withdraw rather than a guarantee of available money, kind of like a paper form of an ACH withdraw (which is why I thought we had cashier's checks and such). I did some searching now and it seems that intent to deceive/defraud is required at least in some states. Common sense would say you wouldn't get any company shares or other things until your check clears, so if it bounces, is it actually fraud? Or just being a jerk?
      - wolf550e 9y ago
        https://en.wikipedia.org/wiki/Cheque_fraud#Combating_cheque_fraud https://en.wikipedia.org/wiki/Cheque_fraud#Combating_cheque_... I think all cases of writing a check you know isn't covered is fraud. The cases when you thought it would be covered but you were mistaken are difficult to judge, need to prove what you knew when.
      - patio11 9y ago
        Due to the way the US legal systems work, it is unlikely you'll be arrested for uttering if you bounce a $50k check as an accredited investor but far more likely it will happen if you bounce a $50 check as a welfare recipient. There are a number of gates which will prevent the first incident from becoming a criminal case -- the police will laugh at it, the DA will decline to prosecute, the 'victims' will not choose to set fire to their professional reputations by demanding a prosecution, etc etc. Police won't laugh at the second one -- sorry, business owner, we know that people defraud you all the time and that sucks. The DA has an expedited program to defer some of these cases and prosecute repeat offenders. The victim has someone whose literal job it is to move the case forward and convictions per year may be a KPI for them. (That someone is probably not a lawyer, this being not worth the time of a lawyer on a private payroll, but rather "loss prevention specialist" or similar. "Yes sir, we do intend to prosecute. Yes sir, I would be happy to get you that documentation. Yes sir, I can be at that meeting. Thank you sir, we appreciate you looking out for us.")
- godzillabrennus 9y ago
  #truth on the don’t trust a contract detail mentioned I've known people who claimed to be from a VC fund that had $10MM raise out of $50MM and was making investments. In reality they had no money raised but signed $11.5MM in investments with startups. It's a crazy world out there. Vet your investors.
  - logicallee 9y ago
    I don't understand your story. Why would they sign investments they can't pay for?
    - chrisabrams 9y ago
      You're trying to think rationally against an irrational situation :O
      - logicallee 9y ago
        Something was going through their head. For comparison, how many people who are poor enter terms to buy hundreds of millions of dollars of property without having any mortgage or ability to pay or any expectation other than "wheeeeee - that was fun." I'd wager approximately zero. There is more to the above story. As described, these VC's wasted tons of their own time. How did they even have offices?
        EGreg 9y ago
        I toured some apartments without the ability to afford them. Perhaps these VCs were expecting money to come in but in the end their fund fell apart?
        logicallee 9y ago
        Touring is very different from signing! OP said "had no money raised but signed $11.5MM in investments with startups". maybe they mispoke.
- novaleaf 9y ago
  totally agree on that (yes is when the check clears) I was helping a startup getting VC and basically the check never came. Granted that they wernt' very happy with the progress and that was pretty transparent, but they never actually said it would impact anything. I think the founder could have handled it better but I can understand taht it's sometimes hard to tell what a hard-requirement is from a stretch-goal.
lisper 9y ago
He left out an important one: sometimes VCs say no by saying yes. It goes like this: VC response: We're really interested and we want to do the deal, we just need to wait to hear from partner X who is currently out of town. Translation: We are about to fund one of your competitors, and we want to string you along as far as possible in the hopes that we can distract you from other fundraising efforts so that you will be less of a threat to our baby. Comment: It's not a "yes" until the check clears. (And even then you should probably wait two weeks just to be sure.)
- RobbieStats 9y ago
  Good one. I'll add it.
  - lisper 9y ago
    I learned this one the hard way.
- cookiecaper 9y ago
  Yeah, the most successful business people you've never heard of will rarely if ever come out with an explicit denial (the ones you have heard of may also practice non-denial generally, but are playing by somewhat different rules). Saying "no" makes people really mad. People remember how you made them feel, not necessarily what you said or did. Thus, it is most important to look after the feelings of the people you contact, even at the cost of saying or doing things disingenuously. If you make people feel like you're interested in them and their ideas, that's much better than making an enemy who has sworn to prove you wrong. The best way to do this is to make them think you're 100% on board and that you're only being stopped by a technicality or some high-friction process that you're helpless to overcome. Only a relatively small handful of people will eventually put two and two together and realize that you're intentionally stringing them on; most people prefer to believe the flattering interpretation that the deal is pending, it's just hung up somewhere along the way. The reluctance of <AVERAGE_PERSON> to misrepresent things for commercial or political convenience only allows those with fewer scruples to rise to the top of the heap.
lpolovets 9y ago
Most of these basically bucket into "I'm not interested" or "I'm not interested at this time, but I think that might change in the mid-term future." Why are there so many ways to say No? Because just saying "no" is rude -- although some of the 15 alternatives in the Medium post are even worse because they waste a founder's time. It's like if a recruiter reaches out to you: most people don't reply, or they reply with something like "sorry, this is not a great fit" or "I'm not looking at this time." FWIW, there are many VCs (though probably not the majority) that give concrete reasons when saying No. When I got into venture capital 5 years ago, many peers told me to be vague in order to maintain option value in a company's future fundraises. That sounded dumb to me because if I were a founder I would want feedback, so I try to give useful feedback when I'm passing. That's worked out well over time, and founders whose companies I passed on often introduce me to other founders, or reach out when they're fundraising again.
EGreg 9y ago
Seriously, with all the new crowdfunding and ICO options, why fight to convince the gatekeepers like VCs when you can first try to convince some percentage of the population to each put in a small amount?
- Nanite 9y ago
  Because VC's are not gatekeepers? I'd love to get in on a round at the same time as a VC, but would definitely pass up on a startup which can't garner VC interest.
  - EGreg 9y ago
    You pretty much described the dynamic of gatekeepers. That's like saying "if an artist can't get a record label to sign them, I would also pass on them"... and now there are tons of ways to self-publish and crowdfund, including soundcloud and patreon and kickstarter!
    - miiiiiike 9y ago
      It's hard out there. The crowdfunding platforms are not friendly places for early-stage web projects.. Unless you're famous. https://www.kickstarter.com/discover/categories/technology/web?sort=newest https://www.kickstarter.com/discover/categories/technology/w...
- dmitrygr 9y ago
  Just because a new method of running a ponzi scheme has not yet put anyone behind bars does not make it an OK thing to do.
  - deleted 9y ago
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  - igorgue 9y ago
    Just because you're ignorant... You're allowed to make that comment :). Also, you think all VC deals are fair and square? Naive.
chris_va 9y ago
From the VC side, it looks like this: "LOOK AT ME LOOK AT ME LOOK AT ME! Ok, what do you have? 40 slides that tell me nothing other than you have a big vision and if you own 10% of <insert market here> it will be worth a lot." At this point, VC options are: 1) Hard pass (crazies, maybe 60% of people pitching), but you want them to still refer their friends for better deal flow, so <insert excuse here> that makes them feel better about rejection. 2) Soft pass (30%): maybe they have something, hard to tell without spending weeks figuring out what they really meant, and if the team is even the right team to be solving the problem, much less actually competent. Give them some <come back when> that doesn't ruffle them too much. 3) Next stage of funnel: The 10% that actually got their concept across, explained why they are a good team to implement it instead of the other 10 people you heard with the same idea, and why now is the right time. Enter diligence, and hopefully you can convince the other partners that you aren't crazy by taking a chance on them.
- athenot 9y ago
  Would it be helpful if a team adds a slide to the effect of "Here are reasons why you might NOT want to invest in us"? i.e. stating the deficiencies we know we have and addressing them head on instead of waiting until reality differs from expectation.
  - SmellTheGlove 9y ago
    I'm not a VC, so take this for what it's worth (nothing) - Self-awareness is huge. You should know the reasons why a VC might not want to invest in you, regardless of whether it ever comes out of your mouth or goes on a slide. If a VC is interested but has concerns, they're going to ask these questions, and you'll be better prepared to address them. It's up to you - and situational awareness matters - whether you decide to speak to these points even if you're not asked.
    - fapjacks 9y ago
      Totally! So just show them you've got situational awareness by taking the initiative without them having to ask.
keithwhor 9y ago
I think the thing to realize here is that "no"s aren't personal. Well, I mean, sometimes they are. But they're usually not. A $1B fund has roughly three years to allocate that $1B in resources --- that's nearly $1M a day. You need to make sure that the speed at which you're expected to invest doesn't detract from the quality of deals, so your bar has to be extremely high. I think a valuable skill to develop as a founder is to recognize the difference between; "no, but I like you" and "no, and I don't like you / don't care." This industry is built on relationships. Unfortunately there will be a ton of people who just don't give a shit about you. But the ones that do, they're going to help unlock doors for you, and even if you get a "no", focus on recognizing real "clicks" with people.
miiiiiike 9y ago
It's not just VCs. Over the past three years I've noticed that more and more people in general are giving "positive sounding words" instead of a yes or no. Designers, developers, writers, business people, from every part of the world. The best people I've worked with have always gotten back to me right away with a concrete yes or no. I do the same, anything else is a waste of time. As soon as someone starts giving me anything like the responses in the article I move on.
- jsmthrowaway 9y ago
  It's the California No. Look it up. It's well-known and endemic in the Bay Area and Hollywood, in particular. My personal annoyance is how prevalent it is in dating now, given the number of people who respond violently to rejection (thereby training people to avoid dishing it out). I gave this serious thought and realized I'm 100% on California No style rejections ever since moving here, while in other places I've lived I'd get "sorry, I'm not interested," or something similar. California No creates ambiguity -- do I continue asking? Did this person get hit by a bus? If you think you're doing a favor by avoiding saying no, you're not. Say no. Every time.
  - miiiiiike 9y ago
    Dating is very different, I wouldn't pass judgment. There's a real risk of physical harm at every stage. If you're unsure give 'em one more "I'd love to hear from you." before deleting their contact info and moving on.
    - jsmthrowaway 9y ago
      In my experience, even one followup is risky after a California No, your specific wording doubly so (I've received "why don't you take the hint" to a single, very similar, followup the next day). I no longer follow up and tend to follow a policy of never asking for business or personal asks over text-based media, because a California No is harder to pull off in person. It evolves in person, though, to a "yeah, that would be fun, let's do it sometime" (and the examples in the article) to buy time until the California No can be successfully executed. I did mention the physical harm and am aware there are a growing number of folks who react violently and offensively to being rebuffed by internalizing it and taking it personally -- I know this because I've had to make conscious efforts to not tie rejection to my self-worth (I've been guilty in the past), and I've repeatedly seen rejections turn very, very ugly. So I am sympathetic that folks are often trained to -j DROP instead of -j REJECT. Also, the situations are strongly related. It's a general theme of being unable or unwilling to say no, whether in business or personal relationships. It transfers the ambiguity of the situation to the asker: are they saying no? Did they lose their phone? Did the e-mail go to spam? Did the investor's mom die? Am I being too persistent by following up? This must be balanced against feeling entitled to a response, though, because nobody owes you anything. It's a fine line. My personality type strongly prefers closure, and open issues like this nag me incessantly through no control of my own. I literally lose sleep over California No, trying to think of the explanation, whether business or personal. I cannot control that despite much effort. Was it something I said? Then I replay the entire conversation in my head. Then it's 4AM. The next generation is already learning that it's normal, and those of us who like (nay, need) "no" are now the diminishing minority.
pcsanwald 9y ago
There are a bunch of variants for B2B as well: "We see you have X reference clients, and usually like to see X+2 reference clients" "We'd like to see you get a little further along in terms of product/market fit, and then let's talk"
- deleted 9y ago
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dccoolgai 9y ago
Having never been around the West Coast tech scene much, it sometimes seems that there is almost a tacit expectation that someone "owes" you money for your idea. Without commenting on whether that is "bad" or "good", it's just interesting to compare it to the attitude most of the people I know who start businesses on the East Coast who would find it at least odd if not right outlandish that someone would give you money before you demonstrated in some concrete way that you have the ability to tender it back with some form of interest.
- someone7x 9y ago
  I don't know about the entitlement you describe, but isn't getting in on a startup more about 10x payouts instead of incremental "interest" payouts? I can only imagine a VC is not interested in a concrete demo of marginal profitability, and would prefer a pitch for some disruption that has some worthwhile chance of success. Different types of investors attract different types of entrepreneurs would be my guess to explain the difference you see.
jedberg 9y ago
The most frustrating no I've gotten, repeatedly, is "We'd love to get in on this as soon as you find a lead investor". Translation: We don't really believe in your idea or you, but if you get a big player to put some money in we'll be happy to follow them.
- RobbieStats 9y ago
  Ohhhh, that's a good one. I'll add it!
- AndrewKemendo 9y ago
  Yes this is probably the most common one I've seen. "We'd be in for 300k if you can find someone who leads at 500k," or something like that.
- Alex3917 9y ago
  > Translation: We don't really believe in your idea or you If they're willing to invest a small amount of money it means they think it's interesting and they'd like to basically 'bookmark' it by putting up a small amount of capital in order to receive your company updates and have a small piece of the upside if things go well, but they don't have enough understanding of the product or conviction that it will work to drop everything and make a huge investment in it. And I don't think that's a bad thing at all. E.g. there are a lot of folks who own a few hundred bucks worth of Bitcoin, so is it wrong that they haven't yet invested a large portion of their net worth into blockchain/crypto? I don't think so, I think it just means they're dipping a toe in the water and trying to get a feel for what's going on.
- chris_va 9y ago
  That is not quite what that means. Usually that means "We kind of like your idea/team, but we don't have the technical resources to fully diligence it (or manage the board after funding), so we want to wait until someone more competent is willing to take a risk on your company".
- jartelt 9y ago
  Alternative translation: We believe in your idea, but have a small fund and cannot take up the majority of your funding round. Thus, we would love to invest a smaller amount as part of a syndicate.
redm 9y ago
The one that was missed is where the VC is really excited during the meeting, does more research after the fact, and then switches to one of the provided answers. In my experience, VC's don't do any research UNTIL they are excited.
Alex3917 9y ago
Trying to recognize noes from investors strikes me an being a bad framework for thinking about business. Of all the investors whom I've asked if they'd like to receive an email update every time we add a zero to our core metrics, I've yet to have a single one say no. It's your job to make a good product with good economics, marketing, retention, etc., and to consistently grow your metrics. If you're not willing to actually do this and demonstrate progress on a regular basis then why would you expect anyone to fund your company?
Odenwaelder 9y ago
Why not just say "no"?
kinkrtyavimoodh 9y ago
I don't like the tone of this piece. It makes it sound like all startups out there have a RIGHT to be funded, and annoying, idiotic VCs just say no them... how mean of them. But plenty of startup ideas are BS, plenty of founders are incompetent, and they don't automatically deserve a VC's ear, let alone their money. Why do they think they have the right to an audience? I know that you can have exceptions (Harry Potter was rejected by some 12 publishers before Bloomsbury took it), but if no VC is willing to even listen to you, consider that you are the problem, and not the VC industry. I know that a bit of boundless optimism on behalf of the founders is needed for startups to succeed, but exercise that optimism in your own time and on your own dime.
- tomschlick 9y ago
  Exactly. Someone has to tell the founder of "Uber for vegan dog food" that they have a shitty idea. Sometimes its harder to crush someones dream than to just lie to them and not respond to their emails later.
  - kinkrtyavimoodh 9y ago
    No VC wants to become famous as the VC who said no to the next unicorn. That's another reason they don't explicitly say no. A 'no' is not a judgment on your whole existence, and it's mostly not personal. It's a judgment on your current state. But most people don't say it that way. They go all "See mom you didn't believe in me but I told you I'd become something". Well your mom didn't believe in you because you were smoking pot and failing all your classes when you were 16 and had half a foot in prison. Good for you if you managed to turn your life around but don't blame mom for her lack of confidence.
- Clubber 9y ago
  To me it sounds like all these responses are from people who need a backbone and just tell the person they aren't interested.
- j45 9y ago
  I wonder if part of this tone is attributed to the culture of seeking permissions that VC's have in part smartly funded to create through their marketing and reach. Want to innovate? Get VC blessing and money. Want to create something? Get external validation first from a funder. Even thought the vast majority of startups are self-funded, the mindshare of VC messaging in the space is dis-proportionate. This leaves a real question, if getting funding is about leverage, getting some traction and revenue first is not a bad thought. It's really nice to see YC being a beacon of support in this regards too. No one deserves money. The predominant VC culture doesn't deserve the right to shoot down people by stringing them out, or making them feel they aren't adequate, when no one is. Ideas are rarely good in the beginning and need time to form and develop like the entrepreneur... but the idea that you can't get anywhere without funding is a big fallacy. A word like deal flow on the wrong kind of VC's lips is cringeworthy. Even learning to get good at freelancing, contracting and consulting teaches you enough business skills that are transferrable to most startups, not to mention being able to make some amount of seed money that would be available through funding. I wouldn't say this about YC because they have a true founder support culture to go with the value add from leadership. I really hope this model of funding and investing in the person over the idea spreads widely. The best funding and validation is from your clients. Scaling and growth funding is much easier to find.
netvarun 9y ago
"Let me circle back."
- gfodor 9y ago
  the worst
deleted 9y ago
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rickdeaconx 9y ago
This is so painfully accurate.
rdtsc 9y ago
Is it a pretty safe bet to say if VC-s are not calling you asking to invest, there is little chance you'd get them to invest by calling them. Also there 0 downsides for them just stringing you along as other pointed out. "We are totally interested, lets see your details blah blah" then pawn you off to Hayden.
- eropple 9y ago
  > Is it a pretty safe bet to say if VC-s are not calling you asking to invest, there is little chance you'd get them to invest by calling them. Emphatically no. Nobody's radar is that good. Waving a hand to attract some attention directly works, if you have something to back it up.
kalal 9y ago
I never got this business in business. If your idea is really good, then you don't need to ask for money.
danm07 9y ago
In my experience, everything but "yes" means no.
yodon 9y ago
As an entrepreneur, I find it valuable to have coffee with entrepreneurs I don't know and listen to their pitches, founder-to-founder. When I do this, just like VC's, I find most of the pitches I hear are terrible ideas pitched by people with no knowledge/experience of the industry/problem they are trying to solve. Why do I find this helpful? Because I watch my own reaction to the experience. I've just met this person. They've just told me their dream, the thing they quit their job to do, invested years of their life in, and it's an absolutely terrible, terrible idea. What do I do? If I can, I give them good advice within the confines of what they are trying to do. And in almost all cases that's as far as I can go. I just met this person and they just met me. It's not my job or my place to crush their dreams and the odds are vanishingly close to zero percent they'd listen to me if I tried, so I don't (think about all those VC rejections, how many of those VC rejections caused the entrepreneur to drop the idea? The answer is probably pretty close to zero). Even with close friends, it's very dicey whether to say "I think that idea is a mistake" because most entrepreneurs are so driven by passion (and need to be). Each time I hear one of those terrible pitches, I try to remember this is why VC's don't want to tell people solid no's, and this is why I should be so appreciative for every hint of criticism I've ever received. Because people will absolutely tell you your idea is great and they'll almost never tell you what's profoundly wrong with it. I put as much truth and as much insight into my answers and observations on those painful pitches as I think the entrepreneurs can hear, and hope they'll eventually internalize it and pivot in a better direction, because "please, for the love of god and your family and mortgage, stop what you're doing now" simply isn't an ansewer the entrepreneur will be able to hear from a stranger (or probably even a close friend).
- gnicholas 9y ago
  Totally agree — I was recently approached by a guy who wanted me to integrate his feature (idea) into my product. Since I'm normally in the position of asking bigger companies to integrate my technology into theirs, it was eye-opening to see things from the other perspective. I found myself asking him the same questions that others ask me, and I could see how the answers I give might not be sufficiently convincing to my prospects. Talking to other founders can be very enlightening, if a little depressing.
- 9y ago
KirinDave 9y ago
Best "No" I've heard recently: "Are you way too early this time? Because last time you were way, way too early."
jscheel 9y ago
I got some good advice in 500 a few years ago when trying to raise a Series A. We were getting the "location" excuse over and over. It usually went something like, "we love what you are doing, and we would probably invest in you, but your location is a non-starter for us." The truth, as was illuminated to me during, is that they just aren't interested. If you were a compelling enough business for the investor, your location would not be a factor. If you can prove that you are succeeding in your location, then the location obviously isn't an issue. Too many investors saw our location as an easy out, and it took a while to understand that. We had way too much hand-wringing about upending our families and moving to the Valley to try to secure investment, when we should have just been looking inward at our own shortcomings.
- logicallee 9y ago
  it's only an excuse if you moved your company to silicon valley and it turns out they were lying and still didn't want to invest. As it is you got a hard "no, because of your location." I am shocked that you think location doesn't matter and that it was not the truth. whoever advised you of that is wrong. of course it matters. why do you think more deals happen in silicon valley than elsewhere? because there are no good startups elsewhere? shockingly misinformed/in denial. you should have believed the reason you were very clearly given. or falsified it by moving to silicon valley. or realized that actually, you are the one saying no.
  - logicallee 9y ago
    I can't believe this was downvoted. If a VC has 27 portfolio companies in silicon valley and 0 based outside of it, for example, how is it an "excuse" if they tell you they want to invest in that geography?
  - bhnmmhmd 9y ago
    I also cannot fathom the reason this comment got downvoted. I would be happy to hear about the reason.
Mz 9y ago
I have had a class in Negotiation and Conflict Management. If you haven't had any training in negotiation, at least get a copy of the book "Getting to Yes." It is short and research-based. It takes time to broker a deal. (Of course, that doesn't mean every single person is being straight up honest with you every single time they communicate.) This article kind of admits to being perhaps unnecessarily snarky. ("Note: I’m normally not this cynical, but this article was fun to write ") I don't have experience trying to woo VCs for an investment. But closing a big deal tends to be time consuming due to the slow process of gradual exposure of pertinent info on both sides. So, I am reluctant to take this article too seriously.
fuzzieozzie 9y ago
Everything short of seeing the money in your bank account is some version of "No." Now get back to work!
tommynicholas 9y ago
There are two versions of this one: "VC response: We’d love to get in on this as soon as you find a lead investor!" The first is "talk to us when you have a lead". That's not helpful and it's bullshit. When you have a lead you can always raise as much money as you want - I do not contact these VCs back when I get a lead. "We are 100% committed for at least $X00,000 if you get a lead or fill out the rest of the round" - very helpful, shows conviction, etc. This version is still not great, but look everyone can't be a lead, and having good folks 100% committed with $$ amounts shows a lead you have interest and will quickly fill out a great round around their check. Don't do the former, only do the latter.
dfjpitcher 9y ago
Gave a presentation to an analyst at DFJ. Showed her an alpha prototype. She said, very interesting, but we really wanted to fund <competition>. That other company was in a similar space, but did not have the product that we demoed. Then they got funded by DFJ and in 6 months, that company released an inferior clone of our demo. In 2-3 years they got acquihired by Google (the founders did not do very well judging from their subsequent LinkedIn jobs), and Google shut the product down. Our product grew bootsrapped and has been feeding us for 10 years, without making anybody rich, just comfortable.
losteverything 9y ago
Im curious, are there serial pitchers? Round after round of "nos"
jaoued 9y ago
So funny to read and so true. Moral of the story, best money to secure is the one from customers. Much more difficult to get but so rewarding and the types of answer we get from prospective customers does not exceed 3.
erik_landerholm 9y ago
My shortened version of the answer to this topic: if they don't say yes, it's no.
jaxomlotus 9y ago
> VC: Thanks, but this isn’t a fit for us right now. Let’s keep in touch. I don't see what's wrong with this. It's a clear no without slamming the door on a future investment should the scenario change. If the VC would say "VC: Thanks, but this isn’t a fit for us ever" that would be shortsighted.
jacquesm 9y ago
The reason VCs say no 'without saying no' is because they would like to keep the door open in case you and your crazy idea - against all odds - succeed and need a follow on investment a while from now. The reason they say no to begin with is because you are not pitching in a vacuum, you are pitching together with another 1,000 or so companies in a year, 900 of those will get 'no' right off the bat, 100 will get a meeting (or two) dedicated to reviewing their proposition in more detail, 10 of those will enter due diligence (at substantial risk to the VC in case the deal does not go through) and maybe 8 out of those 10 will get funded. The amount of time wasted on worthless pitches by people that don't stand a chance of getting funded is very large, and no amount of feeling that you are entitled to funding is going to get you funded unless you manage to convince the other side of the table that you are one of those 10, which means you need to look better than the other 990. Good luck!
- cheetos 9y ago
  > 10 of those will enter due diligence (at substantial risk to the VC in case the deal does not go through) What exactly is the "substantial risk" that VCs take on by doing due diligence on ten companies a year?
  - jacquesm 9y ago
    DD isn't exactly cheap. And neither is partner time, that's probably a more precious resource than money at your average VC. A failed DD says as much about the VC as it says about the company, it more often than not translates into 'VC didn't do their homework', and it can really eat into the '2' of the 2 and 20, those DD costs will come straight out of the operating capital of a fund. Especially for smaller VCs this can really hurt.
    - cheetos 9y ago
      Thanks for the detail. To me, that sounds like the cost of doing business as a VC, more than risk. Forgive me if I have a little less empathy for the other side :)
dboreham 9y ago
Well, statistically whatever the VC is saying, it means "no".
graycat 9y ago
Here I consider just early stage information technology VC -- later stage and bio-medical can be much different. Yup, from my experience, the OP has what a lot of VCs do. One thing for an entrepreneur to do is to read some remarks from a VC or their firm about what their interests are. Then, when their interests well cover my startup, I write them and explain how their interests cover my startup. So, sure, I rarely hear back with anything and otherwise nearly always just as some in the OP. So, then I get pissed: (A) They said what their interests were; (B) I wrote them showing how their interests covered my startup, but (C) they ignored my contact. Bummer. So I used to, sometimes, wait a week or two and then write them and say that they were so unresponsive that there would be no way we could work together successfully and stated that I withdrew my application. Since then, in part I wised up. By process of elimination, I began to conclude some basic facts about VCs. (1) Mostly their stated "interests" don't much matter. (2) They actually do have some interests and these are nearly universal across VCs and their firms: They are interested in traction, significant and growing rapidly, especially in a large market. (3) Really, the situation is essentially as in the old Hollywood line, "Don't call us. We'll call you." Or, really, VCs want to learn about the startup from existing buzz, virality, etc. They want to see the product/service, play with it, and try to estimate how successful it will be in the market. (4) For a first step, for a VC, (1)-(3) is about all that matters. Actually, (1)-(4) seem to be so astoundingly uniform that they must have some common cause. My guess at the common cause is the larger LPs, e.g., pension funds; they insist on (1)-(3). For me, I'm a sole, solo founder, toilet cleaner, floor sweeper, ..., computer repair technician, systems administrator, ..., programmer, user interface designer, data base administrator, software designer, product manager, CTO, COO, and CEO with a tiny burn rate. Some venture funding could have made some of the work go faster, but really I haven't needed venture funding and don't really need it now. But with all the above, there is a surprising situation: My burn rate is so low that I can continue self-funding until my Web site is live. Then, if users like my work, soon I'll have enough revenue from routine efforts running ads that I will have plenty of free cash for organic growth without equity funding. If I get that growth, then I'll have a life style business with, again, plenty of free cash for more organic growth. About that time, some VCs will learn about my startup and give me a call. They will expect that my company has about five co-founders, each with maxed out personal credit cards, has a business bank account close to $0.00. They will assume that the company and each of the co-founders is just desperate for an equity check on just any terms, say, because each of the co-founders has a pregnant wife. Then the VCs will believe that they can play hard to get, strike a hard bargain, and grab control of my company for next to nothing. At that time I will check my computer, confirm the name of their VC firm, and let them know the date long before when I sent them a description of my company they ignored. So, I'd inform them that they were too late, that my plane has already left the runway, and no tickets were for sale. So, now sometimes I write VCs just for fun, so that if my startup does work and they do call me, then I can tell them that I wrote them and they ignored my contact! To me a biggie point is that apparently the VCs want nothing to do with any business planning, crucial core secret sauce technology, etc. To me, such things are the keys to the big successes the VCs must have to get the investment returns their LPs have in mind to invest in VCs. Further, such planning, special technology are the keys to the many amazing technology successes of US national security. Well, again, apparently VCs want to wait for traction significant and growing rapidly. Maybe that approach will usually be okay for VCs: At least apparently the VCs believe that on the way to a big company, a startup will nearly always need some equity capital. But for a sole, solo founder with a tiny burn rate and writing software, the VCs can miss out: That is, by the time the VCs want to invest, the founder will no longer want or need the investment. A big example of such a sole, solo founder success was the Canadian romantic match making site Plenty of Fish.
websitescenes 9y ago
I've experienced at least two of these responses in the last few months. Your write up has confirmed some of my suspicions. Tying to raise funds is hard! Luckily I have enough saved for a six month runway, that will get me to beta and hopefully a yes on some venture capital. Thanks for sharing.
rdlecler1 9y ago
Of all the VCs I spoke with, ba16z was the best. They were proactive in reaching out (2nd3rd/4th+ teir VCs are lazy), they gave you a quick no, acknowledging their fallibility, and telling you why they passed. That said if you randomly email a VC and don't hear back, they're not obligated to respond. They get hundreds of inbounds each month and 99%+ are simply uninvestable.
- ganeshkrishnan 9y ago
  How did you get their contact? Were you networked by someone?
  - rdlecler1 9y ago
    They had reached out.
graycat 9y ago
In the last few years, for early stage, information technology venture capital, the situation has been changing radically: A blunt fact is, that the VCs very much need big wins, commonly, say, 30% ownership in a company with exit value $1+ billion. Moreover, even more seriously, to get their limited partners (LPs) excited, they need some ~30% ownership in another Microsoft, Apple, Cisco, Google, or Facebook. That's just the facts of life. To pass the giggle test, that's the game they are playing, the business they have chosen. We need to keep in mind, beyond Moore's law and the Internet, the examples Microsoft, Apple, Cisco, Google, or Facebook don't have a lot in common. So, we can't hope to extract much in the way of predictive patterns by just external empirical observations. So, if VCs or anyone is to find another Microsoft, ..., Facebook, they they will have to look deeper than just patterns from external observation. Also we should keep in mind, say, http://www.kauffman.org/newsroom/2012/07/institutional-limited-partners-must-accept-blame-for-poor-longterm-returns-from-venture-capital-says-new-kauffman-report http://www.kauffman.org/newsroom/2012/07/institutional-limit... and http://www.avc.com/a_vc/2013/02/venture-capital-returns.html#disqus_thread http://www.avc.com/a_vc/2013/02/venture-capital-returns.html... on the average venture capital return on investment. One word summary, the average return is poor, not high enough to excite LPs. Here is a hint at the nature of the radical change: At http://a16z.com/2014/07/30/the-happy-demise-of-the-10x-engineer/ http://a16z.com/2014/07/30/the-happy-demise-of-the-10x-engin... Sam Gerstenzang, "The Happy Demise of the 10X Engineer" with in part "This is the new normal: fewer engineers and dollars to ship code to more users than ever before. The potential impact of the lone software engineer is soaring. How long before we have a billion-dollar acquisition offer for a one-engineer startup? " So, a solo founder building a company worth $1 billion? Of course, there is half of an example -- the Canadian, Internet based, romantic matchmaking service Plenty of Fish with a solo founder, with two old Dell servers, $10 million a year in revenue, all just from ads from Google. He added people and sold out for $500+ million. So, his ~$500 million is half of the $1 billion A16Z mentioned. So, what are the causes of the radical changes? (1) Cheap Hardware. From any historical comparison, within computing or back to steamships, now computer hardware is cheap, dirt cheap; transistors are cheap; so are compute cycles, floating point operations, main memory sizes, hard disk space, solid state disk space, internal data rates, LAN and Internet data rates, etc. Dirt cheap. (2) Infrastructure. It used to be that an information technology startup could expectd to have to build or at least wrestle with lots of infrastructure. Now quite broadly, getting the needed infrastructure is much easier and cheaper. So, nearly any room in the industrialized world with a cable TV connection can be a quite active server farm because the rest of the infrastructure, to a local Internet service provider, a static IP address, a domain name, and plenty of Internet data rate for a quite serious business, is right at hand. Of course, the big quantum leap in easy infrastructure is the cloud, from, say, Amazon, Microsoft, etc. (3) Software. Now software is much easier. There is a lot of open source software, excellent software for quite reasonable prices, etc. And really it's much easier just to write new applications level software. Web pages, graphics, database operations, algorithms, etc., all are much easier. So, with (1)-(3), a solo founder with a good idea for a startup to be worth $1+ billion can for darned little cash write the software, bring up the idea as a Web site, run ads, get publicity, and, if users come, get good revenue. It's easy to argue that at current ad rates, a server costing less than $1500, kept busy, could generate monthly revenue $200+ K for investment by the founder of basically just their own time. Such a solo founder with that revenue, then, will just laugh at any suggestion that he should take an equity check, form a Delaware C-corporation, and report to a BoD. Instead he will just form an LLC and remain 100% owner. Then, the main issue now is the evaluation of the basic idea of the sole founder. Or if the idea is really good and VCs wait until there is traction significant and growing rapidly, then the VCs will be too late. Or, the solo founder wrote the software, has one server from less than $1500 in parts connected to the Internet, has a static IP address and a domain name, has done and is doing some publicity things, and otherwise is running the business each month for not much more than pocket change, for less than a lot of people spend on McDonald's or pizza or Chinese carryout. Literally. So, the founder's startup is just dirt cheap to run. If enough users like the site to keep the server busy, then the founder is getting maybe $200 K a month in revenue, plenty to grow the size of the server farm, and in a few months buy a nice house, for cash, put several nice new cars in the garage, for cash, and spend a hour each afternoon in the nice infinity in-ground pool. Then a VC calls and wants to invest $10 million for 30% of the business and have the founder report to a BoD of a Delaware C-corp. -- we're talking LOL. Does that situation happen very often yet? Nope. But now it is just such situations that the VCs desperately need in order to get a significant fraction of ownership in $1+ billion exit values. Or, put very bluntly, the VCs desperately need really exceptional startups. For Microsoft, ..., Facebook, there are no visible patterns. The founders no longer need big bucks for a team of developers, expensive servers, and communications data rate. Net, for the projects the VCs must have, by the time they want to invest according to their old rules, a solo founder with a good idea has already got plenty of revenue for rapid organic growth and a life style business and won't accept an equity check. Again, so far there are not a lot of examples of such solo founder startups, but the radical change and the big deal for the VCs is that it is just such startups that stand to be the exits the VCs desperately need. So, for the next Facebook, etc., by the time the VCs call the founder, all they will hear back are laughs, and the VCs will have to push back their chairs, think a little, and realize that they just missed out. The VCs will see that, really, there has been a radical change and they must make some radical changes or just miss out and go out of business. So, finally we discover that the core idea is what is just crucial because for a good idea a solo founder can do the rest alone for essentially just his own time as the investment. So, to evaluate startups, must evaluate the idea at just the idea stage and just hope that the founder will accept a check.
vit05 9y ago
So how do you know when you get a Maybe? Every time you do not get a yes, does it mean you got a no? I have contact some VC using emails and showing my MVP. Usually they ask some questions, or give some advice. Sometimes they say No, but for now... Other times they said that it is not a fit for us. One of them say that we are in a different country and that he preferred to talk in person.
emiliobumachar 9y ago
Pg: "Here's a test for deciding whether a VC's response was yes or no. Look down at your hands. Are you holding a termsheet?" From http://paulgraham.com/guidetoinvestors.html http://paulgraham.com/guidetoinvestors.html
jroseattle 9y ago
Best "no" conversation I ever heard. Us: how did you like our pitch? VC: we're a no, because we don't trust your unit economics. Us: fair enough. Could you please share some scenarios you've invested in where there were parallel unit economics to us? We'd like to understand what you know about our space and where those economics make sense to investors such as yourselves. VC: certainly! We have an investment in <X> that's in your space, and their unit economics look great! The assumptions you have and the ones they have are about the same, but look at their margins! Us: ummm, so that's a function of revenue/price that we don't believe is even feasibly attainable. Our margins are smaller because we think the per-unit revenue is going to be challenged. It's why our numbers are fairly skeptical. VC: well, we believe they can reach that (unfounded) level of revenue. Within a year, the company this group funded was raising a Series A to stay alive because -- drum roll please -- the unit economics were not panning out. I say this is the best "no" because we had hard feedback on what worked for them. It also let us know they didn't really understand how price in our market space was going to have downward pressure. Our approach was to start very cheap, then improve over time. These investors weren't interested in that approach; rather, they went with the team who had "better margins". We learned a lot, and kept learning, from this investor's "no".
ourcat 9y ago
In my experience, some would just never come to Terms and just 'ghost'.
lafar6502 9y ago
Boo hoo hoo, bad daddy not giving candy when asked...

383 points by RobbieStats 9y ago

These are all still pretty fast No's in my experience. The worst No's are the ones where they ask to do Due Diligence and then never open the dropbox folder. Or if you are on your fifth meeting and they just keep trying to pump you for competitive information. So how do you know when you get a Yes? When you get a wire or a check. That's the only way. Even a signed note or Equity docs don't mean anything until that money clears. The best No's I've had were from Bessemer and a16z years ago. Almost immediate and right to the point that they wouldn't invest, with specific reasoning/metrics behind them. A++ would get told no again.

deleted 9y ago
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fao_ 9y ago
> The best No's I've had were from Bessemer and a16z years ago. Almost immediate and right to the point that they wouldn't invest with specific reasoning/metrics behind them. Don't you mean "without specific reasoning/metrics behind them"?
- cbhl 9y ago
  I think they're saying the "no" had specific reasons and metrics for the no.
- kornish 9y ago
  He's saying that they made a decision, then explained the reason for their decision. That's the best possible way to receive a No as a founder.
- yebyen 9y ago
  I don't think so, I think it says he was really pleased with the rejection (and that could have been because it came with actionable feedback, like reasons and metrics.)
- mtgx 9y ago
  I think a comma is missing: > Almost immediate and right to the point that they wouldn't invest, with specific reasoning/metrics behind them.
komali2 9y ago
>Almost immediate and right to the point that they wouldn't invest with specific reasoning/metrics behind them. Was going to comment on the article itself: You shouldn't walk away from a VC without this in hand. Kind of a general sales concept - never take "no" without a good reason.
- patio11 9y ago
  A related sales concept is forcing people to say no, even if you don't get a reason for it. This is why some very effective sales folks will follow up essentially forever until they get a definitive answer. It looks like crazy behavior if your mental model is "I brushed him off twice, clearly that is a constructive no, why can't he take the hint", but the rep's mental model is "I close deals all the time after the 18th unanswered followup. If I haven't gotten a no yet, there is insufficient evidence to exclude the possibility that e.g. they're just busy."
  - greenshackle2 9y ago
    That's why when I'm not interested or trying to cancel something I always give a content-less, irrefutable reason. If you give a specific reason, they will challenge it. "No, I don't want this product, because I'm not interested." "I'd like to cancel this credit card, because I don't want to have this credit card anymore."
    - enraged_camel 9y ago
      I've lied to pesky sales reps and telemarketers and told them that I've been diagnosed with terminal cancer and have six months to live. That ends the conversation pretty quickly and they never call back.
      - bigiain 9y ago
        "Oh, I'm so sorry Mr Enraged_Camel... Perhaps I can interest you in a new unsecured credit card with a $25k limit?"
    - 9y ago
tptacek 9y ago
Came here to write the same thing. This needs about 5-10 more "No" variants that all include the words "yes, we're excited to move forward with you, and...". I'm not sure we ever got a VC to give us one of these waffling "no"'s without apply serious pressure.
jessmartin 9y ago
> So how do you know when you get a Yes? > When you get a wire or a check. That's the only way. YES to this.
brightball 9y ago
> Or if you are on your fifth meeting and they just keep trying to pump you for competitive information. 15 years ago after the funding I'd arranged to start a company fell through after about a year of travelling to raise it...we finally went to a VC. He insisted that he could not sign an NDA because of the precarious position it put him in hearing so many of these pitches. At that point we figured, this was basically our last option anyway so we gave him the pitch. He really liked it and wanted a local company to build it that we weren't comfortable with, so we parted ways. 5 years later I found out he had the company build it about as well as he could from memory of our pitch. It had plenty of flaws but it was a company that ended up selling for several million. As far as I can tell, it was re-sold and the company had a complete shift of focus afterwards. Meanwhile, in NY 2 years after my meeting with the VC an enterprising group of people who were not affiliated with that VC at all pursued and built a business out of one of the core features of my original platform. As it turned out, that feature stood as a business on it's own. I'd included it in the overall system because as an integrated feature, it facilitated a lot of efficiency gains. My platform was a comprehensive information system for public schools designed to make it easier for teacher's to focus on their students, reduce their workload and make it easier for them to communicate directly with parents. As a part of that system, there was to be a market place for teachers to sell and exchange lesson plans. This was back in 2003 and now smaller companies have popped up doing various parts of what our original plan was for. In NYC, Teachers Pay Teachers has made a business out of that aspect and for what it's worth, I'm really happy that they have been successful. The whole experience was really eye opening and I've been extremely reluctant to pursue funding for any of my business ideas because of it. I wish that wasn't the case.
- germinalphrase 9y ago
  I find TPT interesting and - as a teacher - have a strong interest in platforms that could help debalkanize curriculum and support materials; however, it's always seemed to me that the marketplace model (while a successful business) must limit both the amount of teacher engagement as well as the type of teachers/materials present on the platform due to the incentives involved. Because of that, it's never seemed systemically useful. Did the platform you built attempt to create a shared curriculum libraries? If so, was the focus on the school, district or national scale? Happy to take a response via email so as not to derail the thread (see profile).
wfunction 9y ago
Is a check really fine? I presume if a VC is willing to give so many other things and renege on them then he might well give a check that bounces too?
- rcfox 9y ago
  I'm pretty sure it's illegal to write a cheque you know won't clear.
  - deleted 9y ago
    [deleted]
  - wfunction 9y ago
    Oh wow, I didn't know that. I thought a check was a permission to withdraw rather than a guarantee of available money, kind of like a paper form of an ACH withdraw (which is why I thought we had cashier's checks and such). I did some searching now and it seems that intent to deceive/defraud is required at least in some states. Common sense would say you wouldn't get any company shares or other things until your check clears, so if it bounces, is it actually fraud? Or just being a jerk?
    - wolf550e 9y ago
      https://en.wikipedia.org/wiki/Cheque_fraud#Combating_cheque_fraud https://en.wikipedia.org/wiki/Cheque_fraud#Combating_cheque_... I think all cases of writing a check you know isn't covered is fraud. The cases when you thought it would be covered but you were mistaken are difficult to judge, need to prove what you knew when.
    - patio11 9y ago
      Due to the way the US legal systems work, it is unlikely you'll be arrested for uttering if you bounce a $50k check as an accredited investor but far more likely it will happen if you bounce a $50 check as a welfare recipient. There are a number of gates which will prevent the first incident from becoming a criminal case -- the police will laugh at it, the DA will decline to prosecute, the 'victims' will not choose to set fire to their professional reputations by demanding a prosecution, etc etc. Police won't laugh at the second one -- sorry, business owner, we know that people defraud you all the time and that sucks. The DA has an expedited program to defer some of these cases and prosecute repeat offenders. The victim has someone whose literal job it is to move the case forward and convictions per year may be a KPI for them. (That someone is probably not a lawyer, this being not worth the time of a lawyer on a private payroll, but rather "loss prevention specialist" or similar. "Yes sir, we do intend to prosecute. Yes sir, I would be happy to get you that documentation. Yes sir, I can be at that meeting. Thank you sir, we appreciate you looking out for us.")
godzillabrennus 9y ago
#truth on the don’t trust a contract detail mentioned I've known people who claimed to be from a VC fund that had $10MM raise out of $50MM and was making investments. In reality they had no money raised but signed $11.5MM in investments with startups. It's a crazy world out there. Vet your investors.
- logicallee 9y ago
  I don't understand your story. Why would they sign investments they can't pay for?
  - chrisabrams 9y ago
    You're trying to think rationally against an irrational situation :O
    - logicallee 9y ago
      Something was going through their head. For comparison, how many people who are poor enter terms to buy hundreds of millions of dollars of property without having any mortgage or ability to pay or any expectation other than "wheeeeee - that was fun." I'd wager approximately zero. There is more to the above story. As described, these VC's wasted tons of their own time. How did they even have offices?
      - EGreg 9y ago
        I toured some apartments without the ability to afford them. Perhaps these VCs were expecting money to come in but in the end their fund fell apart?
        logicallee 9y ago
        Touring is very different from signing! OP said "had no money raised but signed $11.5MM in investments with startups". maybe they mispoke.
novaleaf 9y ago
totally agree on that (yes is when the check clears) I was helping a startup getting VC and basically the check never came. Granted that they wernt' very happy with the progress and that was pretty transparent, but they never actually said it would impact anything. I think the founder could have handled it better but I can understand taht it's sometimes hard to tell what a hard-requirement is from a stretch-goal.

lisper 9y ago

He left out an important one: sometimes VCs say no by saying yes. It goes like this: VC response: We're really interested and we want to do the deal, we just need to wait to hear from partner X who is currently out of town. Translation: We are about to fund one of your competitors, and we want to string you along as far as possible in the hopes that we can distract you from other fundraising efforts so that you will be less of a threat to our baby. Comment: It's not a "yes" until the check clears. (And even then you should probably wait two weeks just to be sure.)

RobbieStats 9y ago
Good one. I'll add it.
- lisper 9y ago
  I learned this one the hard way.
cookiecaper 9y ago
Yeah, the most successful business people you've never heard of will rarely if ever come out with an explicit denial (the ones you have heard of may also practice non-denial generally, but are playing by somewhat different rules). Saying "no" makes people really mad. People remember how you made them feel, not necessarily what you said or did. Thus, it is most important to look after the feelings of the people you contact, even at the cost of saying or doing things disingenuously. If you make people feel like you're interested in them and their ideas, that's much better than making an enemy who has sworn to prove you wrong. The best way to do this is to make them think you're 100% on board and that you're only being stopped by a technicality or some high-friction process that you're helpless to overcome. Only a relatively small handful of people will eventually put two and two together and realize that you're intentionally stringing them on; most people prefer to believe the flattering interpretation that the deal is pending, it's just hung up somewhere along the way. The reluctance of <AVERAGE_PERSON> to misrepresent things for commercial or political convenience only allows those with fewer scruples to rise to the top of the heap.

lpolovets 9y ago

Most of these basically bucket into "I'm not interested" or "I'm not interested at this time, but I think that might change in the mid-term future." Why are there so many ways to say No? Because just saying "no" is rude -- although some of the 15 alternatives in the Medium post are even worse because they waste a founder's time. It's like if a recruiter reaches out to you: most people don't reply, or they reply with something like "sorry, this is not a great fit" or "I'm not looking at this time." FWIW, there are many VCs (though probably not the majority) that give concrete reasons when saying No. When I got into venture capital 5 years ago, many peers told me to be vague in order to maintain option value in a company's future fundraises. That sounded dumb to me because if I were a founder I would want feedback, so I try to give useful feedback when I'm passing. That's worked out well over time, and founders whose companies I passed on often introduce me to other founders, or reach out when they're fundraising again.

EGreg 9y ago

Seriously, with all the new crowdfunding and ICO options, why fight to convince the gatekeepers like VCs when you can first try to convince some percentage of the population to each put in a small amount?

Nanite 9y ago
Because VC's are not gatekeepers? I'd love to get in on a round at the same time as a VC, but would definitely pass up on a startup which can't garner VC interest.
- EGreg 9y ago
  You pretty much described the dynamic of gatekeepers. That's like saying "if an artist can't get a record label to sign them, I would also pass on them"... and now there are tons of ways to self-publish and crowdfund, including soundcloud and patreon and kickstarter!
  - miiiiiike 9y ago
    It's hard out there. The crowdfunding platforms are not friendly places for early-stage web projects.. Unless you're famous. https://www.kickstarter.com/discover/categories/technology/web?sort=newest https://www.kickstarter.com/discover/categories/technology/w...
dmitrygr 9y ago
Just because a new method of running a ponzi scheme has not yet put anyone behind bars does not make it an OK thing to do.
- deleted 9y ago
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- igorgue 9y ago
  Just because you're ignorant... You're allowed to make that comment :). Also, you think all VC deals are fair and square? Naive.

chris_va 9y ago

From the VC side, it looks like this: "LOOK AT ME LOOK AT ME LOOK AT ME! Ok, what do you have? 40 slides that tell me nothing other than you have a big vision and if you own 10% of <insert market here> it will be worth a lot." At this point, VC options are: 1) Hard pass (crazies, maybe 60% of people pitching), but you want them to still refer their friends for better deal flow, so <insert excuse here> that makes them feel better about rejection. 2) Soft pass (30%): maybe they have something, hard to tell without spending weeks figuring out what they really meant, and if the team is even the right team to be solving the problem, much less actually competent. Give them some <come back when> that doesn't ruffle them too much. 3) Next stage of funnel: The 10% that actually got their concept across, explained why they are a good team to implement it instead of the other 10 people you heard with the same idea, and why now is the right time. Enter diligence, and hopefully you can convince the other partners that you aren't crazy by taking a chance on them.

athenot 9y ago
Would it be helpful if a team adds a slide to the effect of "Here are reasons why you might NOT want to invest in us"? i.e. stating the deficiencies we know we have and addressing them head on instead of waiting until reality differs from expectation.
- SmellTheGlove 9y ago
  I'm not a VC, so take this for what it's worth (nothing) - Self-awareness is huge. You should know the reasons why a VC might not want to invest in you, regardless of whether it ever comes out of your mouth or goes on a slide. If a VC is interested but has concerns, they're going to ask these questions, and you'll be better prepared to address them. It's up to you - and situational awareness matters - whether you decide to speak to these points even if you're not asked.
  - fapjacks 9y ago
    Totally! So just show them you've got situational awareness by taking the initiative without them having to ask.

keithwhor 9y ago

I think the thing to realize here is that "no"s aren't personal. Well, I mean, sometimes they are. But they're usually not. A $1B fund has roughly three years to allocate that $1B in resources --- that's nearly $1M a day. You need to make sure that the speed at which you're expected to invest doesn't detract from the quality of deals, so your bar has to be extremely high. I think a valuable skill to develop as a founder is to recognize the difference between; "no, but I like you" and "no, and I don't like you / don't care." This industry is built on relationships. Unfortunately there will be a ton of people who just don't give a shit about you. But the ones that do, they're going to help unlock doors for you, and even if you get a "no", focus on recognizing real "clicks" with people.

miiiiiike 9y ago

It's not just VCs. Over the past three years I've noticed that more and more people in general are giving "positive sounding words" instead of a yes or no. Designers, developers, writers, business people, from every part of the world. The best people I've worked with have always gotten back to me right away with a concrete yes or no. I do the same, anything else is a waste of time. As soon as someone starts giving me anything like the responses in the article I move on.

jsmthrowaway 9y ago
It's the California No. Look it up. It's well-known and endemic in the Bay Area and Hollywood, in particular. My personal annoyance is how prevalent it is in dating now, given the number of people who respond violently to rejection (thereby training people to avoid dishing it out). I gave this serious thought and realized I'm 100% on California No style rejections ever since moving here, while in other places I've lived I'd get "sorry, I'm not interested," or something similar. California No creates ambiguity -- do I continue asking? Did this person get hit by a bus? If you think you're doing a favor by avoiding saying no, you're not. Say no. Every time.
- miiiiiike 9y ago
  Dating is very different, I wouldn't pass judgment. There's a real risk of physical harm at every stage. If you're unsure give 'em one more "I'd love to hear from you." before deleting their contact info and moving on.
  - jsmthrowaway 9y ago
    In my experience, even one followup is risky after a California No, your specific wording doubly so (I've received "why don't you take the hint" to a single, very similar, followup the next day). I no longer follow up and tend to follow a policy of never asking for business or personal asks over text-based media, because a California No is harder to pull off in person. It evolves in person, though, to a "yeah, that would be fun, let's do it sometime" (and the examples in the article) to buy time until the California No can be successfully executed. I did mention the physical harm and am aware there are a growing number of folks who react violently and offensively to being rebuffed by internalizing it and taking it personally -- I know this because I've had to make conscious efforts to not tie rejection to my self-worth (I've been guilty in the past), and I've repeatedly seen rejections turn very, very ugly. So I am sympathetic that folks are often trained to -j DROP instead of -j REJECT. Also, the situations are strongly related. It's a general theme of being unable or unwilling to say no, whether in business or personal relationships. It transfers the ambiguity of the situation to the asker: are they saying no? Did they lose their phone? Did the e-mail go to spam? Did the investor's mom die? Am I being too persistent by following up? This must be balanced against feeling entitled to a response, though, because nobody owes you anything. It's a fine line. My personality type strongly prefers closure, and open issues like this nag me incessantly through no control of my own. I literally lose sleep over California No, trying to think of the explanation, whether business or personal. I cannot control that despite much effort. Was it something I said? Then I replay the entire conversation in my head. Then it's 4AM. The next generation is already learning that it's normal, and those of us who like (nay, need) "no" are now the diminishing minority.

pcsanwald 9y ago

There are a bunch of variants for B2B as well: "We see you have X reference clients, and usually like to see X+2 reference clients" "We'd like to see you get a little further along in terms of product/market fit, and then let's talk"

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dccoolgai 9y ago

Having never been around the West Coast tech scene much, it sometimes seems that there is almost a tacit expectation that someone "owes" you money for your idea. Without commenting on whether that is "bad" or "good", it's just interesting to compare it to the attitude most of the people I know who start businesses on the East Coast who would find it at least odd if not right outlandish that someone would give you money before you demonstrated in some concrete way that you have the ability to tender it back with some form of interest.

someone7x 9y ago
I don't know about the entitlement you describe, but isn't getting in on a startup more about 10x payouts instead of incremental "interest" payouts? I can only imagine a VC is not interested in a concrete demo of marginal profitability, and would prefer a pitch for some disruption that has some worthwhile chance of success. Different types of investors attract different types of entrepreneurs would be my guess to explain the difference you see.

jedberg 9y ago

The most frustrating no I've gotten, repeatedly, is "We'd love to get in on this as soon as you find a lead investor". Translation: We don't really believe in your idea or you, but if you get a big player to put some money in we'll be happy to follow them.

RobbieStats 9y ago
Ohhhh, that's a good one. I'll add it!
AndrewKemendo 9y ago
Yes this is probably the most common one I've seen. "We'd be in for 300k if you can find someone who leads at 500k," or something like that.
Alex3917 9y ago
> Translation: We don't really believe in your idea or you If they're willing to invest a small amount of money it means they think it's interesting and they'd like to basically 'bookmark' it by putting up a small amount of capital in order to receive your company updates and have a small piece of the upside if things go well, but they don't have enough understanding of the product or conviction that it will work to drop everything and make a huge investment in it. And I don't think that's a bad thing at all. E.g. there are a lot of folks who own a few hundred bucks worth of Bitcoin, so is it wrong that they haven't yet invested a large portion of their net worth into blockchain/crypto? I don't think so, I think it just means they're dipping a toe in the water and trying to get a feel for what's going on.
chris_va 9y ago
That is not quite what that means. Usually that means "We kind of like your idea/team, but we don't have the technical resources to fully diligence it (or manage the board after funding), so we want to wait until someone more competent is willing to take a risk on your company".
jartelt 9y ago
Alternative translation: We believe in your idea, but have a small fund and cannot take up the majority of your funding round. Thus, we would love to invest a smaller amount as part of a syndicate.

redm 9y ago

The one that was missed is where the VC is really excited during the meeting, does more research after the fact, and then switches to one of the provided answers. In my experience, VC's don't do any research UNTIL they are excited.

Alex3917 9y ago

Trying to recognize noes from investors strikes me an being a bad framework for thinking about business. Of all the investors whom I've asked if they'd like to receive an email update every time we add a zero to our core metrics, I've yet to have a single one say no. It's your job to make a good product with good economics, marketing, retention, etc., and to consistently grow your metrics. If you're not willing to actually do this and demonstrate progress on a regular basis then why would you expect anyone to fund your company?

Odenwaelder 9y ago

Why not just say "no"?

kinkrtyavimoodh 9y ago

I don't like the tone of this piece. It makes it sound like all startups out there have a RIGHT to be funded, and annoying, idiotic VCs just say no them... how mean of them. But plenty of startup ideas are BS, plenty of founders are incompetent, and they don't automatically deserve a VC's ear, let alone their money. Why do they think they have the right to an audience? I know that you can have exceptions (Harry Potter was rejected by some 12 publishers before Bloomsbury took it), but if no VC is willing to even listen to you, consider that you are the problem, and not the VC industry. I know that a bit of boundless optimism on behalf of the founders is needed for startups to succeed, but exercise that optimism in your own time and on your own dime.

tomschlick 9y ago
Exactly. Someone has to tell the founder of "Uber for vegan dog food" that they have a shitty idea. Sometimes its harder to crush someones dream than to just lie to them and not respond to their emails later.
- kinkrtyavimoodh 9y ago
  No VC wants to become famous as the VC who said no to the next unicorn. That's another reason they don't explicitly say no. A 'no' is not a judgment on your whole existence, and it's mostly not personal. It's a judgment on your current state. But most people don't say it that way. They go all "See mom you didn't believe in me but I told you I'd become something". Well your mom didn't believe in you because you were smoking pot and failing all your classes when you were 16 and had half a foot in prison. Good for you if you managed to turn your life around but don't blame mom for her lack of confidence.
Clubber 9y ago
To me it sounds like all these responses are from people who need a backbone and just tell the person they aren't interested.
j45 9y ago
I wonder if part of this tone is attributed to the culture of seeking permissions that VC's have in part smartly funded to create through their marketing and reach. Want to innovate? Get VC blessing and money. Want to create something? Get external validation first from a funder. Even thought the vast majority of startups are self-funded, the mindshare of VC messaging in the space is dis-proportionate. This leaves a real question, if getting funding is about leverage, getting some traction and revenue first is not a bad thought. It's really nice to see YC being a beacon of support in this regards too. No one deserves money. The predominant VC culture doesn't deserve the right to shoot down people by stringing them out, or making them feel they aren't adequate, when no one is. Ideas are rarely good in the beginning and need time to form and develop like the entrepreneur... but the idea that you can't get anywhere without funding is a big fallacy. A word like deal flow on the wrong kind of VC's lips is cringeworthy. Even learning to get good at freelancing, contracting and consulting teaches you enough business skills that are transferrable to most startups, not to mention being able to make some amount of seed money that would be available through funding. I wouldn't say this about YC because they have a true founder support culture to go with the value add from leadership. I really hope this model of funding and investing in the person over the idea spreads widely. The best funding and validation is from your clients. Scaling and growth funding is much easier to find.

netvarun 9y ago

"Let me circle back."

gfodor 9y ago
the worst

deleted 9y ago

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rickdeaconx 9y ago

This is so painfully accurate.

rdtsc 9y ago

Is it a pretty safe bet to say if VC-s are not calling you asking to invest, there is little chance you'd get them to invest by calling them. Also there 0 downsides for them just stringing you along as other pointed out. "We are totally interested, lets see your details blah blah" then pawn you off to Hayden.

eropple 9y ago
> Is it a pretty safe bet to say if VC-s are not calling you asking to invest, there is little chance you'd get them to invest by calling them. Emphatically no. Nobody's radar is that good. Waving a hand to attract some attention directly works, if you have something to back it up.

kalal 9y ago

I never got this business in business. If your idea is really good, then you don't need to ask for money.

danm07 9y ago

In my experience, everything but "yes" means no.

yodon 9y ago

As an entrepreneur, I find it valuable to have coffee with entrepreneurs I don't know and listen to their pitches, founder-to-founder. When I do this, just like VC's, I find most of the pitches I hear are terrible ideas pitched by people with no knowledge/experience of the industry/problem they are trying to solve. Why do I find this helpful? Because I watch my own reaction to the experience. I've just met this person. They've just told me their dream, the thing they quit their job to do, invested years of their life in, and it's an absolutely terrible, terrible idea. What do I do? If I can, I give them good advice within the confines of what they are trying to do. And in almost all cases that's as far as I can go. I just met this person and they just met me. It's not my job or my place to crush their dreams and the odds are vanishingly close to zero percent they'd listen to me if I tried, so I don't (think about all those VC rejections, how many of those VC rejections caused the entrepreneur to drop the idea? The answer is probably pretty close to zero). Even with close friends, it's very dicey whether to say "I think that idea is a mistake" because most entrepreneurs are so driven by passion (and need to be). Each time I hear one of those terrible pitches, I try to remember this is why VC's don't want to tell people solid no's, and this is why I should be so appreciative for every hint of criticism I've ever received. Because people will absolutely tell you your idea is great and they'll almost never tell you what's profoundly wrong with it. I put as much truth and as much insight into my answers and observations on those painful pitches as I think the entrepreneurs can hear, and hope they'll eventually internalize it and pivot in a better direction, because "please, for the love of god and your family and mortgage, stop what you're doing now" simply isn't an ansewer the entrepreneur will be able to hear from a stranger (or probably even a close friend).

gnicholas 9y ago
Totally agree — I was recently approached by a guy who wanted me to integrate his feature (idea) into my product. Since I'm normally in the position of asking bigger companies to integrate my technology into theirs, it was eye-opening to see things from the other perspective. I found myself asking him the same questions that others ask me, and I could see how the answers I give might not be sufficiently convincing to my prospects. Talking to other founders can be very enlightening, if a little depressing.
9y ago

KirinDave 9y ago

Best "No" I've heard recently: "Are you way too early this time? Because last time you were way, way too early."

jscheel 9y ago

I got some good advice in 500 a few years ago when trying to raise a Series A. We were getting the "location" excuse over and over. It usually went something like, "we love what you are doing, and we would probably invest in you, but your location is a non-starter for us." The truth, as was illuminated to me during, is that they just aren't interested. If you were a compelling enough business for the investor, your location would not be a factor. If you can prove that you are succeeding in your location, then the location obviously isn't an issue. Too many investors saw our location as an easy out, and it took a while to understand that. We had way too much hand-wringing about upending our families and moving to the Valley to try to secure investment, when we should have just been looking inward at our own shortcomings.

logicallee 9y ago
it's only an excuse if you moved your company to silicon valley and it turns out they were lying and still didn't want to invest. As it is you got a hard "no, because of your location." I am shocked that you think location doesn't matter and that it was not the truth. whoever advised you of that is wrong. of course it matters. why do you think more deals happen in silicon valley than elsewhere? because there are no good startups elsewhere? shockingly misinformed/in denial. you should have believed the reason you were very clearly given. or falsified it by moving to silicon valley. or realized that actually, you are the one saying no.
- logicallee 9y ago
  I can't believe this was downvoted. If a VC has 27 portfolio companies in silicon valley and 0 based outside of it, for example, how is it an "excuse" if they tell you they want to invest in that geography?
- bhnmmhmd 9y ago
  I also cannot fathom the reason this comment got downvoted. I would be happy to hear about the reason.

Mz 9y ago

I have had a class in Negotiation and Conflict Management. If you haven't had any training in negotiation, at least get a copy of the book "Getting to Yes." It is short and research-based. It takes time to broker a deal. (Of course, that doesn't mean every single person is being straight up honest with you every single time they communicate.) This article kind of admits to being perhaps unnecessarily snarky. ("Note: I’m normally not this cynical, but this article was fun to write ") I don't have experience trying to woo VCs for an investment. But closing a big deal tends to be time consuming due to the slow process of gradual exposure of pertinent info on both sides. So, I am reluctant to take this article too seriously.

fuzzieozzie 9y ago

Everything short of seeing the money in your bank account is some version of "No." Now get back to work!

tommynicholas 9y ago

There are two versions of this one: "VC response: We’d love to get in on this as soon as you find a lead investor!" The first is "talk to us when you have a lead". That's not helpful and it's bullshit. When you have a lead you can always raise as much money as you want - I do not contact these VCs back when I get a lead. "We are 100% committed for at least $X00,000 if you get a lead or fill out the rest of the round" - very helpful, shows conviction, etc. This version is still not great, but look everyone can't be a lead, and having good folks 100% committed with $$ amounts shows a lead you have interest and will quickly fill out a great round around their check. Don't do the former, only do the latter.

dfjpitcher 9y ago

Gave a presentation to an analyst at DFJ. Showed her an alpha prototype. She said, very interesting, but we really wanted to fund <competition>. That other company was in a similar space, but did not have the product that we demoed. Then they got funded by DFJ and in 6 months, that company released an inferior clone of our demo. In 2-3 years they got acquihired by Google (the founders did not do very well judging from their subsequent LinkedIn jobs), and Google shut the product down. Our product grew bootsrapped and has been feeding us for 10 years, without making anybody rich, just comfortable.

losteverything 9y ago

Im curious, are there serial pitchers? Round after round of "nos"

jaoued 9y ago

So funny to read and so true. Moral of the story, best money to secure is the one from customers. Much more difficult to get but so rewarding and the types of answer we get from prospective customers does not exceed 3.

erik_landerholm 9y ago

My shortened version of the answer to this topic: if they don't say yes, it's no.

jaxomlotus 9y ago

> VC: Thanks, but this isn’t a fit for us right now. Let’s keep in touch. I don't see what's wrong with this. It's a clear no without slamming the door on a future investment should the scenario change. If the VC would say "VC: Thanks, but this isn’t a fit for us ever" that would be shortsighted.

jacquesm 9y ago

The reason VCs say no 'without saying no' is because they would like to keep the door open in case you and your crazy idea - against all odds - succeed and need a follow on investment a while from now. The reason they say no to begin with is because you are not pitching in a vacuum, you are pitching together with another 1,000 or so companies in a year, 900 of those will get 'no' right off the bat, 100 will get a meeting (or two) dedicated to reviewing their proposition in more detail, 10 of those will enter due diligence (at substantial risk to the VC in case the deal does not go through) and maybe 8 out of those 10 will get funded. The amount of time wasted on worthless pitches by people that don't stand a chance of getting funded is very large, and no amount of feeling that you are entitled to funding is going to get you funded unless you manage to convince the other side of the table that you are one of those 10, which means you need to look better than the other 990. Good luck!

cheetos 9y ago
> 10 of those will enter due diligence (at substantial risk to the VC in case the deal does not go through) What exactly is the "substantial risk" that VCs take on by doing due diligence on ten companies a year?
- jacquesm 9y ago
  DD isn't exactly cheap. And neither is partner time, that's probably a more precious resource than money at your average VC. A failed DD says as much about the VC as it says about the company, it more often than not translates into 'VC didn't do their homework', and it can really eat into the '2' of the 2 and 20, those DD costs will come straight out of the operating capital of a fund. Especially for smaller VCs this can really hurt.
  - cheetos 9y ago
    Thanks for the detail. To me, that sounds like the cost of doing business as a VC, more than risk. Forgive me if I have a little less empathy for the other side :)

dboreham 9y ago

Well, statistically whatever the VC is saying, it means "no".

graycat 9y ago

Here I consider just early stage information technology VC -- later stage and bio-medical can be much different. Yup, from my experience, the OP has what a lot of VCs do. One thing for an entrepreneur to do is to read some remarks from a VC or their firm about what their interests are. Then, when their interests well cover my startup, I write them and explain how their interests cover my startup. So, sure, I rarely hear back with anything and otherwise nearly always just as some in the OP. So, then I get pissed: (A) They said what their interests were; (B) I wrote them showing how their interests covered my startup, but (C) they ignored my contact. Bummer. So I used to, sometimes, wait a week or two and then write them and say that they were so unresponsive that there would be no way we could work together successfully and stated that I withdrew my application. Since then, in part I wised up. By process of elimination, I began to conclude some basic facts about VCs. (1) Mostly their stated "interests" don't much matter. (2) They actually do have some interests and these are nearly universal across VCs and their firms: They are interested in traction, significant and growing rapidly, especially in a large market. (3) Really, the situation is essentially as in the old Hollywood line, "Don't call us. We'll call you." Or, really, VCs want to learn about the startup from existing buzz, virality, etc. They want to see the product/service, play with it, and try to estimate how successful it will be in the market. (4) For a first step, for a VC, (1)-(3) is about all that matters. Actually, (1)-(4) seem to be so astoundingly uniform that they must have some common cause. My guess at the common cause is the larger LPs, e.g., pension funds; they insist on (1)-(3). For me, I'm a sole, solo founder, toilet cleaner, floor sweeper, ..., computer repair technician, systems administrator, ..., programmer, user interface designer, data base administrator, software designer, product manager, CTO, COO, and CEO with a tiny burn rate. Some venture funding could have made some of the work go faster, but really I haven't needed venture funding and don't really need it now. But with all the above, there is a surprising situation: My burn rate is so low that I can continue self-funding until my Web site is live. Then, if users like my work, soon I'll have enough revenue from routine efforts running ads that I will have plenty of free cash for organic growth without equity funding. If I get that growth, then I'll have a life style business with, again, plenty of free cash for more organic growth. About that time, some VCs will learn about my startup and give me a call. They will expect that my company has about five co-founders, each with maxed out personal credit cards, has a business bank account close to $0.00. They will assume that the company and each of the co-founders is just desperate for an equity check on just any terms, say, because each of the co-founders has a pregnant wife. Then the VCs will believe that they can play hard to get, strike a hard bargain, and grab control of my company for next to nothing. At that time I will check my computer, confirm the name of their VC firm, and let them know the date long before when I sent them a description of my company they ignored. So, I'd inform them that they were too late, that my plane has already left the runway, and no tickets were for sale. So, now sometimes I write VCs just for fun, so that if my startup does work and they do call me, then I can tell them that I wrote them and they ignored my contact! To me a biggie point is that apparently the VCs want nothing to do with any business planning, crucial core secret sauce technology, etc. To me, such things are the keys to the big successes the VCs must have to get the investment returns their LPs have in mind to invest in VCs. Further, such planning, special technology are the keys to the many amazing technology successes of US national security. Well, again, apparently VCs want to wait for traction significant and growing rapidly. Maybe that approach will usually be okay for VCs: At least apparently the VCs believe that on the way to a big company, a startup will nearly always need some equity capital. But for a sole, solo founder with a tiny burn rate and writing software, the VCs can miss out: That is, by the time the VCs want to invest, the founder will no longer want or need the investment. A big example of such a sole, solo founder success was the Canadian romantic match making site Plenty of Fish.

websitescenes 9y ago

I've experienced at least two of these responses in the last few months. Your write up has confirmed some of my suspicions. Tying to raise funds is hard! Luckily I have enough saved for a six month runway, that will get me to beta and hopefully a yes on some venture capital. Thanks for sharing.

rdlecler1 9y ago

Of all the VCs I spoke with, ba16z was the best. They were proactive in reaching out (2nd3rd/4th+ teir VCs are lazy), they gave you a quick no, acknowledging their fallibility, and telling you why they passed. That said if you randomly email a VC and don't hear back, they're not obligated to respond. They get hundreds of inbounds each month and 99%+ are simply uninvestable.

ganeshkrishnan 9y ago
How did you get their contact? Were you networked by someone?
- rdlecler1 9y ago
  They had reached out.

graycat 9y ago

In the last few years, for early stage, information technology venture capital, the situation has been changing radically: A blunt fact is, that the VCs very much need big wins, commonly, say, 30% ownership in a company with exit value $1+ billion. Moreover, even more seriously, to get their limited partners (LPs) excited, they need some ~30% ownership in another Microsoft, Apple, Cisco, Google, or Facebook. That's just the facts of life. To pass the giggle test, that's the game they are playing, the business they have chosen. We need to keep in mind, beyond Moore's law and the Internet, the examples Microsoft, Apple, Cisco, Google, or Facebook don't have a lot in common. So, we can't hope to extract much in the way of predictive patterns by just external empirical observations. So, if VCs or anyone is to find another Microsoft, ..., Facebook, they they will have to look deeper than just patterns from external observation. Also we should keep in mind, say, http://www.kauffman.org/newsroom/2012/07/institutional-limited-partners-must-accept-blame-for-poor-longterm-returns-from-venture-capital-says-new-kauffman-report http://www.kauffman.org/newsroom/2012/07/institutional-limit... and http://www.avc.com/a_vc/2013/02/venture-capital-returns.html#disqus_thread http://www.avc.com/a_vc/2013/02/venture-capital-returns.html... on the average venture capital return on investment. One word summary, the average return is poor, not high enough to excite LPs. Here is a hint at the nature of the radical change: At http://a16z.com/2014/07/30/the-happy-demise-of-the-10x-engineer/ http://a16z.com/2014/07/30/the-happy-demise-of-the-10x-engin... Sam Gerstenzang, "The Happy Demise of the 10X Engineer" with in part "This is the new normal: fewer engineers and dollars to ship code to more users than ever before. The potential impact of the lone software engineer is soaring. How long before we have a billion-dollar acquisition offer for a one-engineer startup? " So, a solo founder building a company worth $1 billion? Of course, there is half of an example -- the Canadian, Internet based, romantic matchmaking service Plenty of Fish with a solo founder, with two old Dell servers, $10 million a year in revenue, all just from ads from Google. He added people and sold out for $500+ million. So, his ~$500 million is half of the $1 billion A16Z mentioned. So, what are the causes of the radical changes? (1) Cheap Hardware. From any historical comparison, within computing or back to steamships, now computer hardware is cheap, dirt cheap; transistors are cheap; so are compute cycles, floating point operations, main memory sizes, hard disk space, solid state disk space, internal data rates, LAN and Internet data rates, etc. Dirt cheap. (2) Infrastructure. It used to be that an information technology startup could expectd to have to build or at least wrestle with lots of infrastructure. Now quite broadly, getting the needed infrastructure is much easier and cheaper. So, nearly any room in the industrialized world with a cable TV connection can be a quite active server farm because the rest of the infrastructure, to a local Internet service provider, a static IP address, a domain name, and plenty of Internet data rate for a quite serious business, is right at hand. Of course, the big quantum leap in easy infrastructure is the cloud, from, say, Amazon, Microsoft, etc. (3) Software. Now software is much easier. There is a lot of open source software, excellent software for quite reasonable prices, etc. And really it's much easier just to write new applications level software. Web pages, graphics, database operations, algorithms, etc., all are much easier. So, with (1)-(3), a solo founder with a good idea for a startup to be worth $1+ billion can for darned little cash write the software, bring up the idea as a Web site, run ads, get publicity, and, if users come, get good revenue. It's easy to argue that at current ad rates, a server costing less than $1500, kept busy, could generate monthly revenue $200+ K for investment by the founder of basically just their own time. Such a solo founder with that revenue, then, will just laugh at any suggestion that he should take an equity check, form a Delaware C-corporation, and report to a BoD. Instead he will just form an LLC and remain 100% owner. Then, the main issue now is the evaluation of the basic idea of the sole founder. Or if the idea is really good and VCs wait until there is traction significant and growing rapidly, then the VCs will be too late. Or, the solo founder wrote the software, has one server from less than $1500 in parts connected to the Internet, has a static IP address and a domain name, has done and is doing some publicity things, and otherwise is running the business each month for not much more than pocket change, for less than a lot of people spend on McDonald's or pizza or Chinese carryout. Literally. So, the founder's startup is just dirt cheap to run. If enough users like the site to keep the server busy, then the founder is getting maybe $200 K a month in revenue, plenty to grow the size of the server farm, and in a few months buy a nice house, for cash, put several nice new cars in the garage, for cash, and spend a hour each afternoon in the nice infinity in-ground pool. Then a VC calls and wants to invest $10 million for 30% of the business and have the founder report to a BoD of a Delaware C-corp. -- we're talking LOL. Does that situation happen very often yet? Nope. But now it is just such situations that the VCs desperately need in order to get a significant fraction of ownership in $1+ billion exit values. Or, put very bluntly, the VCs desperately need really exceptional startups. For Microsoft, ..., Facebook, there are no visible patterns. The founders no longer need big bucks for a team of developers, expensive servers, and communications data rate. Net, for the projects the VCs must have, by the time they want to invest according to their old rules, a solo founder with a good idea has already got plenty of revenue for rapid organic growth and a life style business and won't accept an equity check. Again, so far there are not a lot of examples of such solo founder startups, but the radical change and the big deal for the VCs is that it is just such startups that stand to be the exits the VCs desperately need. So, for the next Facebook, etc., by the time the VCs call the founder, all they will hear back are laughs, and the VCs will have to push back their chairs, think a little, and realize that they just missed out. The VCs will see that, really, there has been a radical change and they must make some radical changes or just miss out and go out of business. So, finally we discover that the core idea is what is just crucial because for a good idea a solo founder can do the rest alone for essentially just his own time as the investment. So, to evaluate startups, must evaluate the idea at just the idea stage and just hope that the founder will accept a check.

vit05 9y ago

So how do you know when you get a Maybe? Every time you do not get a yes, does it mean you got a no? I have contact some VC using emails and showing my MVP. Usually they ask some questions, or give some advice. Sometimes they say No, but for now... Other times they said that it is not a fit for us. One of them say that we are in a different country and that he preferred to talk in person.

emiliobumachar 9y ago

Pg: "Here's a test for deciding whether a VC's response was yes or no. Look down at your hands. Are you holding a termsheet?" From http://paulgraham.com/guidetoinvestors.html http://paulgraham.com/guidetoinvestors.html

jroseattle 9y ago

Best "no" conversation I ever heard. Us: how did you like our pitch? VC: we're a no, because we don't trust your unit economics. Us: fair enough. Could you please share some scenarios you've invested in where there were parallel unit economics to us? We'd like to understand what you know about our space and where those economics make sense to investors such as yourselves. VC: certainly! We have an investment in <X> that's in your space, and their unit economics look great! The assumptions you have and the ones they have are about the same, but look at their margins! Us: ummm, so that's a function of revenue/price that we don't believe is even feasibly attainable. Our margins are smaller because we think the per-unit revenue is going to be challenged. It's why our numbers are fairly skeptical. VC: well, we believe they can reach that (unfounded) level of revenue. Within a year, the company this group funded was raising a Series A to stay alive because -- drum roll please -- the unit economics were not panning out. I say this is the best "no" because we had hard feedback on what worked for them. It also let us know they didn't really understand how price in our market space was going to have downward pressure. Our approach was to start very cheap, then improve over time. These investors weren't interested in that approach; rather, they went with the team who had "better margins". We learned a lot, and kept learning, from this investor's "no".

ourcat 9y ago

In my experience, some would just never come to Terms and just 'ghost'.

lafar6502 9y ago

Boo hoo hoo, bad daddy not giving candy when asked...