Why Do We Say “No”… and What Does It Mean?

Most VCs will never give an entrepreneur a clear “No”. Even fewer of them spend time highlighting their concerns. This is not because they are evil or negligent, it’s simply because it doesn’t pay off to give someone a clear No. Far more often, a few scenarios are likely to play out:

  1. “It’s Interesting” – In VC terms this could mean the stuff you’re working on is bogus, the pitch is whack and the team is lame – generally saying, it’s ten pounds of shit in a five pound bag.
  2. “The Fade” – Let the deal tail away. It’s called a “soft No”, and many entrepreneurs have experienced this kind of behavior.
  3. “The Problem” – They might point out some quirk in the business’s story and suggest coming back once it has been resolved. Of course they don’t expect you to ever come back again.

The reason why VCs don’t say “No” has been well articulated many times before, so let’s not xerox the details. Let’s focus on why we here at Traction Tribe decided to clearly say it and what does it really mean?

Saying No is mutually beneficial

First, we’re entrepreneurs ourselves, and we go head over heels for startups and smart people trying to build something from scratch. We’ve done it many times and we know how important it is for an entrepreneur to get feedback from experienced players. We intend to value your days of prep for your pitch with something – even if it’s not the cheese what you were in search of. Saying No and attaching a clear explanation of the red flags we see in your story is something we’d like to contribute with. It’s a sign of appreciation and also a sign of trust.

Instead of bumming you out with straight-up words, it would be more gentle to let you down easy by giving you a load of bull. But if we did, you’re not a step ahead. So we kick ass and take names and we trust you’re smart enough to value our frankness.  We take the risk that you may call us miserable dickheads and throw serious shit on us in the startup community for the rest of your life. Some dudes tend to cope with the No hella poorly.

What does the VC-No mean?

First and foremost it doesn’t mean you’re never getting another shot for the rest of your life. Getting a clearly articulated and reasoned “No” from us (and I believe from any VC in general) already implies a certain level of trust and a willingness to support your journey. So it’s already not a never-ever-no-way type of No. VCs bring home the bacon from proprietary dealflow, after all. Consider the feedback as a task list to complete. Weaknesses pointed out as issues needing to be resolved. Claim you appreciate the feedback (because the overall emotional impression about you will last long, much longer in the VC’s mind than the exact details of what you’re building), and ask if you could holla at them in five simple lines about your progress once every month – you’ll rarely get a denial. That way, you just turned the No into a valuable new friend. And if building a relationship wasn’t why you wanted to work with a particular VC, you’re just wasting the time of both sides of the table.

What if you don’t get a No but nothing happens?

If a VC generally known as a solid player seems to be procrastinating, then it’s simple hesitation. You’re on the fine silver line between a Yes and a No. (An average VCs dawdling might mean a simple soft-No, however.) If you’re feeling like that and dealing with a straight-forward investor I’d suggest you gently push them to clarify the situation. A VC-Entrepreneur relationship is a long-term one, you have to be able to make your future partners show their hands. The psychology of making a verdict tends to be that if there’s a tough decision, people will procrastinate. Pushing the decision itself is a sure-fire bad beat. Your investors are not saying No – because they want you to a certain extent – but they are not giving you a term sheet either – because they’re having concerns.

Without even being aware of what’s the situation, you’re more likely ending up with no investment. Ask them “nicely” to spit out the shitty parts and once you have the real concerns, ask for a week or so to come up with the a clearer vision. The moment when an investor tells you the sure shot is a sort of intimate one, the next level a relationship – you don’t wanna ruin this either by firing back your arguments from the hip nor with playing some usual marketing horseshit about this outstanding investment opportunity which fades away soon. Show props to the concerns, ask some time and come up with a solution. Don’t push. Cooperate.

Summary

The No of a VC has many faces. I’ve seen almost-Yes type of No-s turning to a never-ever type of No. And crystal clear No-s to can of worms startups turning to term sheets and a motherload of dead Presidents. This is because relationships are dynamic, interests tend to change just as people do themselves. Build relationships. The world is small, life is long – you’ll likely need them later on.

Having some experience with VCs saying No? Share with us! We like feedback just as entrepreneurs do.