Getting to “no”
As a former bus dev exec I, of course, was focused on getting to yes with partners like Lotus, Apple, IBM, and many others.
And as an entrepreneur I’ve had many meetings with investors, only a handful of which resulted in investments. But an issue entrepreneurs often have with VCs and other investors is that VCs hate to say “no”. On the other hand it is very hard to get them to say “yes,” as only a tiny minority of startups ever get VC or any outside funding. The reason for their reluctance to say “no” makes sense from their standpoint: why turn down a company that might become a success? if no one else has offered a term sheet or demonstrated strong interest why not wait on the sidelines and see if the company meets its milestones and becomes more desirable as an investment?
But this is a problem for entrepreneurs. You don’t want to be the victim in that song by the Supremes “You Keep Me Hangin’ On“. A quick “no” enables you to cross that investor off your list and move on. An “interesting, we’ll get back to you” puts you in limbo.
There are some VCs who invest based on a certain framework or set of criteria they have determined and those VCs, like Brad Feld, will quickly tell you, “sorry, but that opportunity doesn’t fit our investment strategy.” But many will keep you in limbo for weeks, then say, “we’ve decided to pass.” But then it becomes very difficult to find out why: is it the team? the market opportunity? too much competition? what? They will rarely say.
So if you are raising money, obviously you want to get to “yes” with the right investor(s). But getting to “no” — and better yet understanding why the answer is “no” can help you focus your energies on those investors who have demonstrated strong interest in the company and not waste time and energy on the fence sitters. VCs hate “zombie” companies, those who are neither growing nor dying. Entrepreneurs should be equally wary of investors of can’t bring themselves to say either “Yes” or “No”in a reasonable amount of time.