“No” – One Word a VC May Never Tell You

The summer of 2011 was one of the most surreal times of my life as an entrepreneur. My company, DealsGoRound, a secondary market for daily deals, was receiving routine press coverage in the tech and business journals and I was about to embark on my first fund raising trip to San Francisco. We already received $350K in seed funding from Lightbank, my former employer and Groupon’s initial investors, and they made sure my trip out west was flocked with meetings and calls with top-tier and boutique venture capitalists which they viewed as value-add to our business. For three days, I bounced around Sand Hill Road in Menlo Park and downtown San Francisco meeting with VCs, tech reporters and just about anyone who would listen. The conversations always seemed positive and I felt pretty damn good about where things were going.

After returning home to Chicago, the initial investor conversations continued with follow-up calls, scheduling additional meetings in San Francisco and I continued to take inbound calls from new firms, as well. At any given time, I was juggling at least 15 of what I believed to be legitimate conversations regarding our next round of funding. In my mind we appeared to be in a great place. I clearly realized that DealsGoRound wasn’t going to be the next Twitter, but we were the first company to attack a niche market opportunity which one media outlet pegged as a potential billion dollar opportunity and we had already secured funding from one of the most influential players in the space.

At this point, my focus as CEO was totally taken off the business and 99% consumed with investment conversations. In an effort to maximize our chance for success, I busted my ass for every meeting and every call no matter who it was. If time spent pitching or the sheer number of VC conversations were the goal, I was doing an A+ job. Here comes the problem. As an honest, good hearted and first-time Midwestern entrepreneur, I assumed anyone who was not interested in my business would just say so. Frankly, I expected the same transparency and candor which I was providing potential investors in my pitch. To that end, I had no qualms about calls getting pushed, delays in email responses or general silence so long as the last message I heard from a firm was something along the lines of “This is really interesting. We’ll talk about it with the partners and get back to you.” I assumed the need to push a conversation was justified. And that happened. A lot.

So I waited. Days turned into weeks and then months. There were always one-off conversation here and there and a couple firms dropped out along the way, but the vast majority were still in play according to my notes. As our bank account continued to drop and none of the conversations were moving forward in a meaningful way, I began pushing a little harder on the investors who I considered my top options. While my persistence eventually paid off with a response, almost no one gave me a definitive “no” leaving me with a Lloyd Christmas “so you’re telling me there’s a chance” glimmer in the back of my brain. I kept hearing responses like “we love what you’re doing but want to see a little more traction” or “keep us posted and let’s talk again in a couple months.” What was both confusing and obvious to me was that they clearly had made these decisions days or likely weeks earlier, but didn’t communicate that to me. I gave the first couple people the benefit of the doubt, but as I kept hearing a nearly identical response across the board, I started to understand one of the rules of venture capital? Never close the door on a good team/entrepreneur.

From an investors perspective, they have nothing to gain by telling an entrepreneur “no.” Doing so certainly has the possibility of cutting off all future communication with the company. If you’re a smart leader and you have a solid team, a successful business might only be one business development deal or pivot away. Knowing that, investors are far better off leaving the conversation hanging or pushing a decision into the future assuming they like you. At that point, they can sit back and watch your updates roll in hopefully getting in on a deal should things take a drastic turn for the better. And if they don’t, who cares. There’s no time wasted on their end.

Obviously, this is just my opinion. Not all VCs are the same, nor do they all work this way. I won’t lie. A few are simply pompous jerks who don’t feel any obligation to give you a response. That’s just the way it goes and it’s totally acceptable in this world. In the end, I ultimately brought my efforts back to Chicago where we successfully closed a $1MM series A. While waiting for a clear “no” proved incredibly expensive and a frustrating lesson to learn as an entrepreneur, I don’t regret my path one bit. To me, being an entrepreneur is all about the journey. All I can ask is that I show up to the next fight bigger and better than the one before. Having successfully raised funding from multiple VCs and angels in Chicago and New York since then, I’d like to think I’m putting my learning to use and continuing to grow along the way.

Leave a Reply

Your email address will not be published. Required fields are marked *