Most times, however, what an investor says is just scratching the surface of how he/she truly feels when declining to move forward with your company. Many more factors are inputs into their decision process (that have absolutely nothing to do with you or your company) including:
- Past Experience
- Their Partnership
- The Market
- Their Investors
- The Fund
- Industry Thesis
- Potential Internal Politics
- Personal Situation
The VC job is incredibly hard one: being tasked with finding the diamond in the rough amongst many somewhat shiny rocks.
After receiving several messages from investors pouring into my ShopWell email, I got this wonderful summary from a Managing Partner from a very well respected firm (who asked to remain anonymous). He nicely summarized what a VC would love to say to entrepreneurs (based on a VCs internal dialogue). Below is his artful response:
It’s not that I don’t like you, your team, your idea, your technology, your deal terms, your stage, your positioning relative to your competition, or your exit prospects. To the extent I understand them. Which I don’t really yet as we have only spoken once. It is that our venture capital partnership is based on trust, and one of the deals that I had blow up on me in the past, which I had personally convinced my partners to do, had a similar trait as something in your company. I cannot tell you if it is similar to something with you, your team, your technology, your deal terms, your stage, your positioning relative to your competition, or your exit prospects, as then I would be revealing to you something about one of my failed investments of which I would rather repress the memory. But it was one of those. And the thing is, if I try to push your deal through my venture capital partnership, having already lost our investors’ money because of a similar issue as the one of the table, and if I lose their money again, then I will not have the credibility to bring other deals to the investment committee for approval. For ours is not a 3-strike business, it is a “fool me once, fool me twice” business. My ability to bring the next Facebook or Google to them will have been lost. Now I know this is not your fault, and in fact this situation might be completely different, but it is close enough that, in the scheme of things with respect to my entire firm and the way we do business, I just cannot take the added risk.
Entrepreneurs. Above is the real reason for 95% of the rejections. You should not take any rejection as a true rejection, just as an indication that there is a better fit out there somewhere else. Keep fighting the good fight and don’t stop your quest to change the world.