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« The Art of Saying “No”: Part 1 | Main | The Art of Saying “No”: Part 3 »

03/27/2005

The Art of Saying “No”: Part 2

In my first post on the art of saying "no", I tried to lay out way VC's don't like to say "no".  In this post I lay out of few of the more common ways VCs try to say "no" without really saying "no".

In an attempt to avoid saying “no”, VCs have created a number of very creative, indirect, and often disingenuous ways to say “no”.  Some of the more popular “no” avoidance strategies include:

1.    Bring me the Witches broom!  This involves saying “no” by telling the entrepreneur you will seriously consider funding their company only if they accomplish a highly improbable feat within a very short time period, similar to what the Good Witch of the West did to Dorothy in the Wizard of Oz.  The idea is that when the entrepreneur fails to accomplish the task, the VC is off the hook for saying “no” and can simply wait for the next round of funding (if applicable and so desired).

2.    I’d Love To Date You, But My Parents Won’t Let Me.  This strategy involves telling the entrepreneur that you’d personally love to fund their business but the rest of your partners won’t let you do the deal for any variety of silly reasons.  This strategy allows the VC to avoid passing personal judgment on the deal thus allowing him to maintain a friendly relationship with the entrepreneur.

3.    You’re a really great guy, but I’m just not ready to get back into a serious relationship right now.  This strategy involves telling the entrepreneur that you’d love to invest in their company, but unfortunately you are just too busy with your existing portfolio right now to seriously consider doing a new deal.   This strategy is perhaps the easiest because it completely leaves open the possibility to invest in a future round without having to create any negative waves in the short term.

The hard part for the entrepreneur is that while such excuses are often used to avoid saying a direct “no”, they are also often totally legitimate because some partnerships do require certain milestones to be met before they will fund a deal, and some partners do try to block other partners' deals, and some partners are so busy that prudence demands they don’t invest in any new deals.  Figuring out whether the excuse is genuine or contrived is therefore not as easy as it might seem.

In Tomorrow's Part 3 I will wrap up with my personal "no" approach and how it's worked for me

March 27, 2005 | Permalink

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The thoughts and opinions on this blog are mine and mine alone and not affiliated in any way with Inductive Capital LP, San Andreas Capital LLC, or any other company I am involved with. Nothing written in this blog should be considered investment, tax, legal,financial or any other kind of advice. These writings, misinformed as they may be, are just my personal opinions.