You made the pitch on a Monday to a venture capital firm and you believe you nailed it. Woohoo and hot damn! They laughed at the one joke. They asked good questions about the market size and the patent potential. No one fell asleep and at the end the group was effusive in showing appreciation. This could be it.
A day or two later you receive an email that the venture group decided to pass on your company but thanks and good luck. Ugh. Depression and back to using the credit cards. What happened? Was it presentation skills? Is it a bad idea? Should you go to work at Best Buy? What!? You may never know.
The relationship between entrepreneurs and investors is complicated. Investors are desperate to find good deals. Ideas with the possibility of a big return are really difficult to find. The most difficult part of being an investor is finding the next big thing. Entrepreneurs are desperate for the investment. The credit cards are at the limit and every start up is on the verge of greatness, if only that next round of money comes in. Two desperate parties looking for the same thing – returns. So why is there such a dance after the presentations? Why don’t the VCs give feedback? There are several reasons.
- No one wants to hear “your baby is ugly”. That’s right, your baby, in the form of your idea or your company might be ugly and you are unwilling to accept it. We love entrepreneurs because they are passionate and committed and idealistic. Saying it’s not a good idea or you don’t have the right team will only elicit a rejoinder of protest and angst that no investor wants to deal with.
- No one wants to tell you “your baby is ugly”. It’s no fun to deliver bad news or deal with the protests. The more engagement there is in delivering the negative decision, the more difficult the meeting is. It is just more efficient to send an email.
- Hope springs eternal. If there is a glimmer of hope from the investor, the entrepreneur tends to be too optimistic that there is still money to be had. So investors don’t give feedback because it is heard as, “if you fix this and that then we might fund you.” That is not the case. Almost always, once the decision is made, it is final.
Other reasons could be part of the decision too. Maybe the investors are too heavy in a particular vertical. Maybe the investors are running out of money but want to keep seeing pitches. In both cases, you won’t hear that as a reason.
The solution? Don’t wait for feedback and don’t get mad. Just move on. That investment could be waiting around the next corner. When it comes to investor feedback, it could be like that last break up when you heard, “It’s not you, it’s me.” There is no good way to say I don’t love you.