At Tau Ventures we get 4–5 pitches a day, almost a 1000 a year, and end up investing in 3–4. A few companies don’t get our attention because the idea is terrible or there are questions of integrity. But most are very legitimate efforts, it’s just they are outside focus for any number of reasons — differing views (market, defensibility, competition etc), overlap with a portfolio company, stage, geography, timing, round dynamics (valuation and all the other factors), among others. So if you heard a no from one VC it doesn’t mean your idea doesn’t have legs. Obviously if you hear from enough of them then you should reflect whether it’s the fundraising style or company substance that is at fault.
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Whether you are getting a hard no or a soft no (“let’s keep in touch”) there are still ways of making the connection into a collaboration. Good VCs truly care about doing the right thing and that aside, almost all VCs care about their reputation, so it’s in their interests also to be helpful. This post is focused on converting those investors who declined, which will be most of them, into allies. The four ways listed below are not mutually exclusive but like any human relationship, it’s always prudent to balance how much one asks versus how one gives.
1) Feedback — Most VCs don’t get real feedback most of the time, sometimes out of laziness but often from conflict-avoidance. If you really want to understand then ask the VC if they can share the single reason why they passed, assuring them you are not looking to debate. Chances are you will get a real answer which you may certainly disagree with, but will at least help you analyze the perception and potentially craft your pitch accordingly. If you got real feedback, whether proactively or reactively, you absolutely don’t need to agree with it but an acknowledgement that you read goes a long way.
2) Investor Recommendations — A VC who passed typically shouldn’t be making intros for you, the other investor will ask the VC why they are not investing and can lead to a rabbit hole. This obviously doesn’t apply all the time since you and the VC may be very comfortable with the reasons, for instance if it was because of a mismatch in sector or geography. Regardless, you can still always ask a VC for suggestions of other investors who could be interested, setting the expectation you are asking for advice not intros. One name will be typically more actionable than making it open-ended and unless you are competitive with the VCs’ portfolio they should be helping you. Alternatively you can debate a framework for how to think about investment, for instance the right balance of institutional versus strategic money, how many investors, the ownership of the lead etc.
3) BD and Hiring — If you are in a mature ecosystem, chances are capital is far more fungible than expertise and VCs are actively engaged. Investors will naturally focus on helping portfolio companies first but once again you can always ask. The more focused the ask the higher the chances of getting traction. If you are looking for a particular hire then send them a job rec so they can keep it handy. If you are looking to pilot your product with a customer then give the specs of what you are looking for. The subtext here is it can be a win-win for VCs too if they help two parties to work together.
4) Give Them Leads — Found a VC to be particularly helpful? Or want to continue collaborating with them? Send them a lead, which could include:
- intro to an entrepreneur, their fundraise deck, or even just a tip
- coinvestors they can collaborate with: angels, other VCs, strategics
- LPs that can invest in their fund
- reports / articles that could be useful
- information on events, perhaps opportunities to be an active participant such as a speaker
- private or public recognition
Depending on the VC and your relationship with them you can even skip the double opt-in and follow up directly.
Originally published on “Data Driven Investor,” am happy to syndicate on other platforms. I am the Managing Partner and Cofounder of Tau Ventures with 20 years in Silicon Valley across corporates, own startup, and VC funds. These are purposely short articles focused on practical insights (I call it gl;dr — good length; did read). Many of my writings are at https://www.linkedin.com/in/amgarg/detail/recent-activity/posts and I would be stoked if they get people interested enough in a topic to explore in further depth. If this article had useful insights for you comment away and/or give a like on the article and on the Tau Ventures’ LinkedIn page, with due thanks for supporting our work. All opinions expressed here are my own.