Most “No’s” from VCs are Really No’s. But Time Can Turn Some into Yes’s.

So fundraising is going through a tougher stretch.  And that means, if nothing else … patience.  Seed rounds, A rounds, B rounds, almost all rounds are just going to take longer in many cases.  Longer from the first Zoom, longer for more diligence, and just in many cases, more proof points and more time to get to know each other.  At least for now, VCs are going to take less risk.  Risk still, but less risk.  Less valuation risk.  Less gross margin risk.  Less burn rate risk.

And VCs are already taking less risk on “almosts”.  Almosts are the ones that with just a little more traction, another data point, you’d want to do … but they aren’t there yet.  VCs would often do these in the crazy times of Summer 2020 to Winter 2021.  Today, not so much.

And with that let me just provide some simple advice.

Most VC No’s are … No.  There’s little point in trying to change their minds.  Here’s the thing: most VCs review 100s or even 1000s of pitches a year.  And VCs know only unicorns matter in the end.  So they have to make quick decisions.  And usually, almost always, default to No.  So a No is a No, and it means the VC has already moved on to reviewing the next deals.  You can send an email back, “do you need more data or information?”, but usually if they really wanted that, they would have asked.  Try, but once you get that No email … it’s done.  At least … for now.

But … listen.  Especially, read the email.  It’s not always a No forever.  Sometimes, another month or two of data, one more big customer can do it.  Two of the unicorns I’ve been lucky enough to invest in were like this.  In both cases, I loved the CEO and founders, and believed in the space and vision.  It’s just even for me, a Seed / Late Seed investor, it was just a smidge too early.  I needed just a few more customers to see it in one case.  Another few features in another case.  And then in both cases, the second time, I offered to invest almost instantly.

So you gotta read the email.  If it says No for Now but that they truly believe in you and the space and just want to see a little more traction, squint some more and see if that’s real or B.S.  If it’s real, if you feel it, then follow up in 2-3 months with the good news.  That you’ve grown 40%.  Ask them if they want to be added to your investor updates.  And if really was a No But If There Was a Little More I’d Invest, you may be surprised.  Few things impress an investor more than when a startup outperforms expectations, even in the earliest days.  Call the ball, and hit it further, and almost everyone’s impressed.

You can hear it here from Edith Harbaugh, CEO of $3B+ Launch Darkly.  Bessemer said No in two rounds.  It wasn’t a No to her as CEO.  They were superfans.  But it was first a no to the space — it seemed too small at the time.  And then the second time to it just being a stage off.  But then — a fast Yes the third time.  Very fast.

Published on May 5, 2022

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