15 Ways We Thought We Heard "No" From VC's
Mar 25, 2018
I left my previous job on a Friday. The very next week we had meetings lined up with several venture capital firms. From everything I had read, I knew fundraising could be brutal. Founders would go from meeting to meeting hearing one “no” after another. According to a Forbes article I read, VC's typically only finance one to two companies out of every 100 pitches they see. This means they reject 98-99% of them.
I wanted to equip myself properly for this experience.
I came across an article: 15+ Ways a Venture Capitalist Says “No”. The author talks about different tactics VCs use to reject you without actually saying “no.”
Apparently, many VCs are “notorious for not saying 'no' even though they have no intention of investing.” They like to keep optionality, just in case you prove them wrong in the future. Then they can come running back to invest.
Armed with all the subtle ways a VC could say “no” without actually saying “no,” we set off on our meetings.
Meeting with VC firm in Menlo Park: “Let’s keep in touch. I would love to see you make some progress and in 6 months, we should talk again.”
My Interpretation: Uh-oh, the article gave that example verbatim. What does it really mean? They think we’re too optimistic and will never hit interesting numbers. So, they want more proof that we can bring this business to life. They don’t actually, however, expect us to make it back to them in 6 months.
Meeting with leading VC firm in downtown San Francisco: “We don’t typically invest in seed stage companies. But, we are really interested and would love to talk next round!”
My Interpretation: Again, verbatim from the article. It sounds promising but what does it really mean? They do deals with young companies but don’t want to take the risk on us — so they’ll claim we’re too early. An easy out.
Meeting with small VC firm in downtown San Francisco: “This is very interesting but I need to take time to think about it more. I’m really busy so I need a couple of weeks to sit with it and think deeply.”
My Interpretation: Whoever wrote this article is a genius. What does it really mean? If we’re still around in several weeks we’re damaged goods. Or, we weren’t aggressive enough to get the deal done. It’s a “no” either way, but this way they can push it off until later.
Meeting with top tier VC firm in downtown San Francisco: “This has been very interesting. For next steps, I would love to introduce you to my associate…”
My Interpretation: I’m beginning to think they wrote this article about us. We’re doomed. A follow-up meeting seems promising, but in actuality they’re handing off their dirty work to the associates. That way, they can loosely stay in touch but with little effort.
By this point, Jaleh had grown accustomed to my post-pitch analyses. Referencing the article, I told her that the associate introduction was a kiss of death.
“Really?” she said. She was optimistic. We were getting another meeting with a great firm. Meanwhile, I was researching how to start fundraising on kickstarter.
As it turns out, the associate introduction morphed into an introduction to another partner in the firm. And, finally a “yes.” I guess the article wasn’t 100% right.
A couple of weeks later we had verbal commitments. We felt a twinge more optimistic. We tried not to get too excited. We knew it wasn’t official until papers were signed.
Meeting with VC firm in Palo Alto: “Your valuation is a little high for it to make sense for us. If you bring it down, we’ll consider.”
My Interpretation: Oh no! The article talks about this response but their explanation for what it really means is unclear. It could be a maybe. It could be a no. It could be an opportunity to negotiate.
I was still clinging to the article. I gave my analysis to Jaleh: this was a “no.” We weren’t going to negotiate our terms.
“I think they’ll say yes,” she responded. I wanted to believe her, but knew better. It’s easier to take rejection when you prepare for it.
So, we made a bet. If this investor came back with a “no,” Jaleh would pay for a nice lunch at Zuni Cafe. If it was a “yes,” I was paying.
A week later we were seated at a sunny table at Zuni Cafe, and enjoyed a lovely lunch. On me.