A VC - Latest Comments in Saying No

Re: Saying No

Pete — Wed, 05 Dec 2007 09:06:08 -0000

Hi Fred, I agree with everything you said. The only thing I would add-- if you're going to turn an entrepreneur down saying that you don't have confidence in the entrepreneur, then I think you owe that person some constructive critcism. I'm sure that you do this, but you didn't mention it in your post, so I thought I'd comment.

It's one thing to turn down an idea or a market, but it's a pretty harsh blow to turn down a person, and tell them to their face. At least explain to the person why there is no confidence: i.e., lack of track record, questionable hires made to date, etc.

Pete

Re: Saying No

Adam Benayoun — Thu, 08 Nov 2007 19:11:59 -0000

I prefer you telling me I cannot run the company than waiting for your forever response on investing into my company.
At least if after fews "no" with the same reason I Cannot run the company, I'd start to look for someone who could run the company.
That's better than "waste" your time trying to get a VC to invest without knowing why they all say "no"

Re: Saying No

Andy Freeman — Mon, 22 Oct 2007 01:40:50 -0000

That said, how often do you run into an opportunity that has one fixable problem and what do you do?

Re: Saying No

fredwilson — Sun, 21 Oct 2007 21:51:02 -0000

I love the Talking Heads quotes.

This might be a fun thing to keep up in the comments of this blog going
forward

fred

Re: Saying No

Denny K Miu — Sun, 21 Oct 2007 03:53:35 -0000

I wish there are more VC's like you. My personal experience is that very few of them are capable of saying NO.

" ... in a perfect world, if an idea from an entrepreneur is not ready for funding, VC's should simply tell them to go away and come back when it is ready. But the problem with VC’s is that ... while their instinct might tell them that I stink, their intellect would convince them that they might miss out on the next Google. So VC’s will never actually tell me to go away. Instead, they will hover around and keep me at a sniffing distance until they are convinced that I will never get funded by one of their neighbors."

How to Turn Your VC into Your Worst Enemy
http://www.lovemytool.com/b...

--Denny--

Re: Saying No

Aruni — Sat, 20 Oct 2007 20:23:34 -0000

As others have said, 'no' is 1000 times better than the neverending 'maybe' answers that many VCs give. I'd rather hear 'no' because of xyz (even if it's a brief reason). Just because I hear 'no' I don't interpret that as 'never.' In many cases, it means not right now. I also appreciate this answer from a potential customer because otherwise you can spend your life trying to get them when they really have no intention of working with you. When I have a prospect tell me this I thank them because I can put them on the backburner and focus my attention on other areas.

If you are not confident in the founder/CEO then I think it's perfectly fine to tell them that by saying something like "I think you need to add xyz skills to make this a deal one we are interested in evaluating further." A true entrepreneur (IMHO) will say 'OK, thanks let me work on that and I'll get back to you if it makes sense.' I think many entrepreneurs think they have to force a fit (just for $$) where there just may not be a fit and just like in many relationships if you force a fit in the short term...it can go sour b/c both parties weren't at least 95% bought in on a) the company, b) the mgmt, or c) the market. Make friends, keep them posted, and if not this deal then another deal you are involved in the future might make sense and be a better fit.

Re: Saying No

SCP — Sat, 20 Oct 2007 14:19:22 -0000

Thanks for being human. I've been on both sites and the truth is always better. Be strong. Be direct. Be yourself.

Re: Saying No

ldeakman — Sat, 20 Oct 2007 10:25:55 -0000

As an LP (with Fred and many others), we are in the same position of constantly saying "no". I do try to look at all of the PPMs and presentations but we are often overwhelmed by inbound interest. I've tried a thousand different ways of saying "no" to VCs and I'm sure all you entrepreneurs will be glad to hear that they (the VCs) are faced with the same hunt for capital from LPs and that they hear a lot of "maybe's" and just don't get answers from many LPs. Most of the time it's not the market or the business plan that I'm shooting down but the team. It is very difficult to say no because you can't get conviction around a person or their partners. So when I do say no, I try to be bluntly honest and I've found that is the best way of stopping the bleeding. So far, I'm pretty glad that I said "yes" to Brad and Fred. Lindel

Youre talkin a lot, but youre not sayin anything. - psycho killer

Re: Saying No

fredwilson — Sat, 20 Oct 2007 08:39:01 -0000

We don't have a process that is written in stone like that.

Clearly the people are the most important followed closely by product and
market.

And we do care what price we pay.

I wish I could tell you that we have a specific way that we look at each and
every deal, but we don't. Each one is different and we analyze them
differently.

fred

Re: Saying No

fredwilson — Sat, 20 Oct 2007 08:39:01 -0000

How far back do you want me to go?

Re: Saying No

Mark Waterstraat — Fri, 19 Oct 2007 23:30:47 -0000

Fred. Thanks for the insight you so willingly and frankly share. Our (hopefully soon to be) capital partner tells us their decision process goes, in order, People, Product, Market, Valuation. An investment opportunity must pass each criteria in order to move on to the next. If you pass all four and get through their underwriting committee, you get funded. Do you use a similar process, or will you share your high level criteria?

Re: Saying No

JA — Fri, 19 Oct 2007 22:36:27 -0000

I wouldn't mind seeing a Fred Wilson 'anti-portfolio' -- a la Bessemer --. Let's see the deals you passed on that you wish you said 'yes' to.

Re: Saying No

Mrinal — Fri, 19 Oct 2007 17:57:36 -0000

That is so good to hear Fred - very very few people think like this and then do that. When I was "vocationally challenged" during the downturn, I had the same request from companies/recruiters - 1) tell me no - at least something and then if you can 2) a why so that I can learn and get better.

I think the responsibility lies on both parties and more with the one listening to the No - if they can make the person giving feedback comfortable about it, you will increase your chance of learning and practicing kaizen. A good No almost is better than a Yes - you have a problem to solve and you will probably come out stronger if you have the right attitude. Smooth sailing never teaches you anything.

Re: Saying No

Greg Pass — Fri, 19 Oct 2007 16:20:32 -0000

"Try not to look so disappointed.
It isn't what you hoped for, is it?"

-- "Memories Can't Wait"
Fear of Music

Re: Saying No

fredwilson — Fri, 19 Oct 2007 15:51:01 -0000

Wonderful. I wonder how many talking heads fans we've got in this community

Re: Saying No

Robert Seidman — Fri, 19 Oct 2007 15:44:45 -0000

"And you may find yourself in a beautiful house, with a beautiful wife"
--"Once in a Lifetime"
Remain in Light

Re: Saying No

kareem — Fri, 19 Oct 2007 14:52:04 -0000

I met with a VC recently who was relatively new to the job. She gave us explicit feedback on what she didn't like about our business. It was the most refreshing and helpful meeting I'd taken with a VC, and I told her so.

You're in a service business... if you help out an entrepreneur now (and not just blow smoke like 99% of VCs out there), that entrepreneur will be more likely to want to work with you in the future.

Re: Saying No

John K — Fri, 19 Oct 2007 14:40:17 -0000

I wouldn't ever hold you to this Fred, but what if a team came back to you a month later and said, "we fixed all the things that turned you off". Would you look again?

Re: Saying No

ashkan karbasfrooshan — Fri, 19 Oct 2007 14:14:02 -0000

good post, but it's actually harder to say no when you're an entrepreneur faced with 1000 and 1 growth opportunities, employee requests etc...

Re: Saying No

Don Jones — Fri, 19 Oct 2007 13:54:59 -0000

Great post. Sadly, the venture capital industry is infamous for the never-ending maybe...

Re: Saying No

NelsonMinar — Fri, 19 Oct 2007 13:44:24 -0000

Speaking as an entrepeneur, "no" is a much better answer from a VC than the usual "maybe, could you give us a bit more data on your business? and we have this technology person we'd like you to meet. and could you update us next month with the latest business metrics?". Naive entrepreneurs tend to believe the VCs are sincerely interested when they're just being strung along. It's one of the unpleasant lessons a founder has to learn.

Re: Saying No

fredwilson — Fri, 19 Oct 2007 13:38:21 -0000

"watch out, you might get what you're after"
-- "Burning Down The House"
Speaking In Tongues

Re: Saying No

fredwilson — Fri, 19 Oct 2007 13:36:41 -0000

you took honesty to a higher level!

Re: Saying No

fredwilson — Fri, 19 Oct 2007 13:36:04 -0000

andy's right - it's hard to say "do this and we'll fund you". you don't want to set expectations that way. it's best to say "this is a problem for me" without the explicit committment

fred

Re: Saying No

fredwilson — Fri, 19 Oct 2007 13:33:53 -0000

erik - i only wish i could provide everyone with the experience you had!