This story first appeared in the January issue of Entrepreneur. To receive the magazine, click here to subscribe.
I say no to entrepreneurs a lot — easily 200 or 300 times a year. There are a number of reasons I give: bad timing — it’s too late in the investment cycle or too early for the startup to get funding — or the business model is a poor fit for our strategy, or other pending deals take priority. And occasionally, I let loose with the dreaded “Please don’t call me again.”
These answers serve — in my mind, at least — as a way to move on without getting into a protracted argument. VCs aren’t smart enough nor do they have enough time to give accurate, instantaneous feedback to hundreds of business ideas on the fly. In short, the 30 seconds I spent formulating a reason to say “No thanks” shouldn’t be taken as gospel that alters a startup’s business model. In fact, VC firms often default to saying no just to find enough time to keep the rare yes moving along the lengthy due-diligence process. Savvy entrepreneurs understand this.
What entrepreneurs do after that first “no” matters. Whatever you do, don’t fight or question the rejection. I’ve never seen an investor change his or her mind based on a quick email or phone rebuttal from an entrepreneur. If the door isn’t completely slammed in your face, the first thing to do is ask if you can send regular updates on your progress. Since VCs are always looking for new deals or insights, the answer will most certainly be “yes.” In fact, nearly every deal I’ve seen happen was the result of tracking a business for a while before investing. In this world, scoring a no that leads to an ongoing dialogue — even if it’s mostly one-sided — is actually a big win.
One common response to my rejections that makes no sense to me is being asked to make introductions to other investors. First impressions are huge in this business. If another investor passed on a deal, that’s no endorsement in my book, and I know other VCs feel the same way. Entrepreneurs need to find different avenues to reach other VC firms.
Even though I spend a lot of my time turning people down, my ultimate goal is to say yes. Usually the startups we fund are the persistent ones who kept us aware of their progress after I said no at least once. The lesson here: If one of my VC brothers or sisters or I tell you no, take it in stride, stay the course and keep in touch. No one can say no to that.