Some call a “No” the next best thing to a “Yes” when you are fundraising. Part cliché, part true, in my opinion. Because a “No” is only valuable if you understand it. Otherwise it can be a huge time waster. And getting a clear and fast “No” from angels and VC’s is not always that easy.
Before we got a firm “Yes” we got our share of “No’s”. Here is my personal guide to the land of “No” when you are raising seed capital.
I have found basically five kinds of “No’s” - and I have come to truly respect two of them
and found ways to deal with the others:
1. The “No” in advance. This kind of “No” you get on angels’ and VC’s websites, in interviews and other sources like Quora and Formspring. Here are some examples:
- “We never invest outside the US”
- “We only invest in B2C”
- “We have never invested in a company which hasn’t been referred to us by someone we trust.”
This is their strategy, and that must be their call. These people saved me a lot of time by stating their preferences. I respect that and will not bother them with my pitch if it doesn’t fit their criteria.
2. The silent “No”. At their website they encourage you to send your business plan. Then you never hear from them. There is a fundamental communication problem here:
- The angel/VC thinks that he is sending the signal: “We are flooded by deals and actually don’t have time to answer all, even if we would like to”.
- But the entrepreneur might think that the signal is: “Your idea/team/plan is so bad that it is not even worth an answer”.
Waste of time for the entrepreneur and bad marketing for the angel/VC.
3. The clear and fast “No”. The angel/VC has looked at your start-up, maybe met you and quickly gives their reason for saying no. This will save you a lot of time and sometimes you get valuable input from their answer. Both parties build respect and network.
4. The slow “No”. It can sound like this: “This looks very interesting but we would like to see this, this, this and that.” When you are raising seed capital you just don’t have the time or resources to do too much else than focus on your core development. Unfortunately not all investors understand and respect this. To understand when you are wasting your time is key in this process.
5. The “Yes” that is really a “No”. It can sound like: “Yes, we are very interested, but not right now because we are so busy.Can you come back in two months?” Keep you hopes down when you start hearing the phrase “not right now”.
So here is an appell to all angels and VC’s, who I know really care for entrepreneurs and start-ups:
A. State selection criteria - On your website or wherever a search engine can find it, state your true first selection criteria, typically: Location, Sectors, Referrals, Stages, or whatever selection model you are using. This will save you and the entrepreneur lots of time.
B. Deliver your “No” answers clear and fast - It will give you respect in the entrepreneur community and bring you valuable business in the long run.