The "No" Dialog and Some Observations

Here's some dialog with respect to a company I turned down recently. I'm pointing this out because this kind of back and forth can turn into that dangerous (and endless) "Let's continue the dialog" insanity.  I've cleaned this up a bit for readability and changed some stuff so as to avoid compromising the company or founders.

Me:

Mike, thanks for letting me take a look at []. It's a pass for me.  I've three issues here. First, I talked to 10 kids in the teenage range over at the local high school and this app was 0 for 10. None of them would even come close to giving me a scenario where they would pay for it while also thinking the sponsored games part was weird based on what I showed them.  Second, this is too hit or miss and requires mass numbers before there is scale to interest an advertiser.  Finally, the dollars you are asking will not, in my opinion, achieve the milestones required to get a later round done in the up direction. You simply won't get far enough to prove it out.  I appreciate you letting me take a look and hope the fast no, while not what you wanted to hear, gets you onto the next person.  Now, go prove me wrong, make a ton of money; my feelings wont be hurt.

Mike:

Rick, I appreciate the fast turn around and candid feedback.  If we can get a trial going and show some trending toward mass adoption and some advertisers, could we get you to revisit?  Again, thank you for the fast turnaround, it really is appreciated.

Me:

Generally speaking if you prove me wrong, get great traction, etc, etc, and de-risk the opportunity, you won't need me and/or you will have a zillion guys throwing money at you. I don't want you on a treadmill which has me constantly giving you the next hurdle to jump over.  I would take another look, but it would have to blow me and my partners away and, as I said, I'm guessing somebody smarter than me will scoop you up.

Mike:

Thanks, we will keep plugging away.

Saying no is always tricky. I struggle with this issue at least 10 times every single day. I think it is super important to give feedback but, as you can see, this feedback is a bit of problem.  In the example above, some people could argue 10 people wasn't enough. Some could argue it was the wrong 10, etc.  So there is the possibility that the entrepreneur dives into a rat hole trying to deal with my feedback.  The endless set of hurdles is always a problem and I try, hard, to avoid this.

Typically, you'll get the sorry, not a fit for us answer without much else. The translation of that 'no' can be anything from they were in a bad mood when they read it all the way to they don't get it.   Many VCs/Angels will tell you they don't want to make enemies or close doors, etc.

So what does all this mean to you? How can you get a fast pass but some actual feedback?  Here are some thoughts for you.

Ask For the Fast No:

As weird as it sounds, you telling them (me), your feelings aren't going to get hurt, you recognize the deal flow to close ratio is not in your favor, and a fast no with the three things you didn't like would be sincerely appreciated, can get you some feedback.  This type of approach can help lower the formality of the process.

Accept Email Dialog for What it is:

Email is a wimpy cop out for not having a phone call to explain the no. Guilty as charged and if most people would be honest, they would say the same. All of us, you included, believe email is way more efficient and we can be productive on our BlackBerry devices, etc. It's true but it is impersonal and is a crappy way to interact with somebody you don't know very well.  Again, I'm guilty of this. 

On this flight to San Francisco, for example, I've read 24 executive summary plans/Power Point Presentations.  Of those, 6 are getting a request for more information. The rest would never make it through process for all the standard reasons. So, I've cranked out 18 pieces of email which have tried to layout the reasons why.  Some are easy. We don't do chicken franchises so the plan for new competition to KFC (I'm serious) is getting an immediate pass with a very easy, we don't do chicken.  We don't do wet lab/medical stuff, again, easy pass.  The new search company that is 100% better than Google gets a pass with we would not invest in a direct, overt competitor to Google commentary. It's as straight up as possible. 

The point here is that you are likely to have your communications via email and should plan accordingly. Try to preface your stuff with the request for feedback and, hopefully, you will get some.

Make Your Business Points Clear:

This is linked to the fast no.  Most of the plans/presentations I've been getting have the basic business thesis points and from that I can comment directly on. Typically, you can do the "Here's what believe" or the "In order to invest you have to believe" slide(s) so my feedback can directly respond to these points.  For me, the crisper this part is, the more likely I'm able to give that feedback you might want.

Balance Speed for Details:

Lots of times you will get pass quickly. In this crazy world, it is way better to at least get the no then the silent treatment or (in my view) worse the "let's continue the dialog" stuff. If you have given some opening that says you really are receptive to the feedback, the fast no with some feedback later is a good outcome for you. I will tell you that while there are stories about jerks everywhere in every business, most people in the VC business try to do the right thing. The simple law of averages should work in your favor. (He says, hopefully.)

Don't Expect Names:

It simply is not going to happen. No VC will say, we pass, here is an intro to somebody else based on a plan sent into the firm.  It just won't happen.  The absolute best you could ever, ever, hope for would be for the VC to say something to another VC that they know was hot on a particular thing.  Then that VC would contact you.  Asking for the names of other VCs is a silly request which will not get honored.  Just so you are aware, sorry.

 

No sucks.  In my view, the best 'no' outcome is a no with some feedback. Hopefully, you will be successful an never need to worry about a 'no'!

Comments

[Anonymous]

Rick, like the blog. Your insights from your work are appreciated, especially to non-VC's and entrepreneurs. Keep it up.

[Pat (not]

Hi Rick,

After reading your blog over the past year or so (and sending in a few topic requests) ... I can say if I was "Mike" I would totally appreciate the explicit list.

Having said that, would it make sense for "Mike" to come back to you (or any VC) if he had repurposed his technology for a different market use?

At my startup, we started with an original vision that was unattractive to VCs (+ my original "elevator pitch" required a 4-hour power outage during the ride in order to complete pitch :-) ). I took the casual feedback from VCs and others, repurposed the technology for a different market, got the elevator pitch down to 5 words, etc.

So I am starting the funding process, but I feel like I am hanging back unnecessarily, because of this fear that I only have one shot with each VC/angel I approach. So while I am comfortable with non-perfection on the technical side, I think I am over doing it on the business side.

So my question is: If rather than "Mike" trying to prove you wrong, he went and did what I did ... changed his business plan. Would you reconsider "Mike" if he came back with the same technology but a different market focus?

[Andy Freeman]

> So I am starting the funding process, but I feel like I am hanging back unnecessarily, because of this fear that I only have one shot with each VC/angel I approach. So while I am comfortable with non-perfection on the technical side, I think I am over doing it on the business side.

If, as they say, you only have one chance to make a first impression, perhaps your first impression should be about your relevant strengths, which usually isn't your biz plan.

I may be reading too much between the lines, but I suspect that a close second to Rick's fiduciary responsibilities to his investors is "do I want to work with those folks".

I'm reminded of something that I once heard about song pitches. (Songwriters pitch songs to performers and their managers.) The claim was that the biggest mistake that one could make in a song demo was to do a real performance because that made it harder for the performers to figure out how they'd do it. Instead, the best pitches were naked - just the words, music, and maybe one instrument.

Let's ask him. Rick - is a tight biz plan the best (or only) intro?

[rick segal]

Andy,
Thanks for coming by. No, in my opinion, a tight/solid business plan is not the only way to do this. In my opinion, the demo is just as effective or even more so. I'm living, up close and personal, a funding process and I know that for all my hand waving, nothing I can say or do has beaten "Here, check this out." I show this app on the device and I immediately get 'it's cool' and we are off to the races or "huh?" at which point I know the road on this partner is going to be a tough one.

For me, the demo or product has always been the prime thing which then, if I like it, has me digging into everything else. But that's me, others may be different.

>R<