Dear SaaStr: Is It Acceptable for VCs to “Ghost” Founders who have invested so much time and effort with them? How should founders respond to this?
I understand the frustration, and it’s annoying, but you have to change your thinking.
Working with VCs is sales. It’s a founder trying to sell shares to a VC. And sometimes, it’s a VC trying to sell themselves to the founder as well. But one side or another is just selling, at least until a term sheet is signed.
I know it’s a lot of work and risk engaging with a VC. I know it doesn’t feel that it’s reciprocal, or that VCs value all that time, effort, and risk you put in. I know it’s especially annoying when you let a VC do customer diligence, take up a lot of favors with your customers … and nothing ends up happening.
Ghosting is frustrating and not cool in any sales process. I’m not perfect here myself.
But it’s most common when a prospect (i.e., VC) has some genuine, real initial interest … and then the product (i.e., startup) doesn’t end up quite being what she wanted during a multi-step learning and diligence process.
VCs should follow up better, and sometimes, it’s exacerbated by the fact that you are an “almost”.
A deal you probably won’t say Yes to in the end, but interesting enough to not want to say No yet. I’m guilty of that myself. The “No’s” I quickly say No to. The Yes’s are fast. But the Almost’s? Sometimes, they just sort of … drag in my inbox. I want to believe, but, also, it hasn’t quite risen about the bar. That inbox drag inadvertently turns into ghosting. (I’m sorry). For me, at least, a few things that create “Almosts”:
- Great CEO, but not a great CTO. Or vice-versa.
- Good but Not Great Growth in a space I still like. E.g., 90% growth at $1m ARR isn’t fast enough to justify a venture investment. But if you like the space and the founder, sometimes you don’t want to say No. You’d like to do the deal, if only … if only … it was growing a smidge faster.
- Strong metrics, but something’s a bit off. But you’re not quite sure what.
A simple rule: if a prospect (VC) won’t take another meeting you try to schedule … doesn’t re-engage … and you’ve asked nicely 2–3 times … you have to just move on. Don’t sweat it.
You didn’t close the deal. It happens. Don’t take it personally or read any more into it than that. Move on.
Most deals don’t close in sales. You’re lucky as a sales rep to close 20% of the warm leads you get. Even 10% is pretty good. Venture capital close rates will be lower, unless you truly have a hot hand,
Let me tell you just 1.5 insights / hacks to slightly de-frustrate the process. Most VCs don’t have enough (x) great deals that (y) they really want to do. They meet 1000 startups a year, but they are lucky to meet 10 a year that they really want to invest in that also meets their investment criteria.
So when they finally find one, they hone in on it. Often like a heat-seeking missile. It won’t be unclear to you. You’ll know. So if you’ve followed back up 1–2 times and not heard back … you got a No. You’ll hear back quickly if it’s a Potential Yes.
And so just ask. Ask at the end of each VC meeting — “What Are The Odds You’d Invest, Based On What You Know?” Just ask. If you ask after every meeting, every Zoom, then you can’t really get ghosted.
It's totally OK to ask a VC at the end of a pitch meeting, "Based on what you know now, what are the odds you'd invest?"
In fact, it can save a lot of time
— Jason ✨Be Kind✨ Lemkin 🇮🇱 (@jasonlk) October 17, 2023
And sometimes, it really is a Not Yet. You may really be just 3–6–12 months too early for that VC. (For example, I generally don’t invest at less than $8k-$10k in MRR myself.) If that’s the case, just ask if they want to be updated in 6 months. They’ll tell you quickly. If they do.
A related post here:
(note: an updated SaaStr Classic answer)