The first time I ever tried to fundraise, I was completely clueless. My team had built a highly technical product that allowed consumers to co-browse with each other, but we had no customers or users.
A lot of investors turned me down, but I didn’t even realize it because they were not clear in their rejections. Investors would tell me:
“Oh this is a very interesting product. Let’s keep in touch.”
“The technology is quite interesting….thank you for showing it to us.”
As a naive founder, initially I did not push to get to a call-to-action or to learn what the next steps should be. I had no idea how close I was to successfully raising investor dollars (read: not at all).
As I met with more investors, eventually, in my frustration of not getting anywhere, I realized that I needed to push harder to find out what investors really thought and whether they were going to invest in my company soon.
Still, investors were quite nebulous in their thoughts on my company. I remember this one phone call very clearly:
“So, are you going to invest?” (I was not sure how to ask this in a great way, so the first time I asked it, I was pretty blunt because I just needed to know the answer.)
“Well, it’s an interesting product. Let’s chat again in a couple of months.”
“I’m not sure I understand; is that a yes or a no?”
“It’s a no for now.”
That conversation was just the first step in my becoming a savvier fundraiser, but it took many, many more missteps and poorly-run fundraising meetings for me to eventually understand how this game is played.
Most investors are simply not upfront with their true thoughts because they are afraid to reject entrepreneurs. They think entrepreneurs will not come back to them later when they have made more progress or have found a better business. I find that this is particularly common behavior amongst investors who have never been founders. So this is the type of vacuous email you typically receive as an entrepreneur:
This is a big mistake in my opinion. Although, founders should also be less clueless on how to run investor meetings and should ask good questions (something I hope to change with this blog), if investors were more upfront with their true thoughts and opinions, founders would find that feedback valuable.
Great founders can take feedback well and can learn and adapt quickly. The investors I have the greatest respect for are the ones who were candid with me about my company – whether they invested or not – without my having to pry their thoughts out of them.
I realize it is a tall order to ask investors to be explicit with their feedback. It’s not a fun job to send tons of rejection emails everyday. When I first started investing, I was unsure what to write in a rejection email, and so I asked Dave McClure for advice. He told me to frame my emails positively – what it would take for me to invest?
This has been one of the best pieces of advice I’ve received in joining Venture Capital. So, I now write entrepreneurs emails like this:
Although, it’s still not fun to be the bearer of bad news, it causes entrepreneurs to come back to me later when they’ve fixed some of my concerns. This helps me see how quickly teams can learn and adapt, which is one of the best indicators of a team.
Plus, we end up having productive conversations about their progress which actually *helps* me build a relationship with entrepreneurs.
Entrepreneurs: what has been the most helpful “rejection” you’ve received? Tweet @dunkhippo33.