Saying No
Thick skin is an entrepreneur’s armor. Given how tough it is to get your ideas off the ground and run a startup, it’s no surprise that rejection and failure happen more often than not and that founders should be used to hearing “No.”
The problem? You don’t always hear “No.”
Talk to any entrepreneur who’s gone fundraising and s/he will talk about investors who seem interested at first, but then post-meeting they either 1. go radio silent, 2. give some vague answer when asked point blank if this is something they’d want to fund, 3. string you along and request that you keep them updated if you get other investors to commit, or 4. actually do say no, but don’t give much of a reason other than “This isn’t really something we invest in.”
I’m definitely guilty of one or more of these tactics. Every investor is.
To be fair, it’s not easy to be upfront. No one wants to tell another person that their baby is ugly. The problem is that this does a disservice to the entrepreneur. And in the “Pay It Forward” culture that is Silicon Valley, I believe that offering honest feedback - as uncomfortable as it may be - is the best thing you can do for a startup. You don’t have to be an ass about it, but you should try to be honest. Whether you have concerns about the actual product, the ability of the team to execute, some aspect of their strategy that you disagree with, the market they’re in, etc., constructive criticism is valuable.
Finally, for the startups who are convinced that an investor who rejected them made the wrong decision - they may be right. The investor could very well be wrong about them. Which brings me to this key point - as much as people try to make investing more “scientific”, particularly at the seed stage, at the end of the day you realize that it really isn’t and maybe never will be. There may be certain signals or qualities you look for in a founding team that will likely set them up for success. But in the end, a lot of it comes down to plain old human interaction. Maybe the investor was having a bad day. Maybe the idea was great, but the chemistry wasn’t there. Maybe the investor only wants to participate if someone else is doing it. (How often do you hear investors jumping in on a deal because “so and so” is also investing? Social proof, though not always the best reason to invest, is nonetheless powerful) Having a high EQ is one of the most valuable tools you can have in your arsenal. (along with the thick skin, of course)
I certainly don’t claim to be perfect, so hopefully publishing this post will keep me accountable to being transparent about why I might say “no”.
