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The Art of Saying “No”: Part 1

Believe it or not, saying “no” to a potential investment opportunity is one of the hardest things to do the Venture business.  It’s also, unfortunately one of the things that VCs have to do most often.

Personally, I must admit that for the first couple years of my VC career I was pretty bad at saying  “no”.  Sometimes I would say “no”, but sometimes I would say “maybe” when I really meant “no”, and sometimes I wouldn’t say anything at all in the hopes that the entrepreneur wouldn’t try to contact me again (like when I got unendorsed/irrelevant business plans via e-mail).

The issue with saying “no” in the venture business is that there’s really isn’t any upside to saying “no” due to the fact that:

A. You might be saying “no” to providing the initial funding to the next Google or Cisco or Yahoo.    By saying “no” you risk alienating the entrepreneur to the extent that your are shut out of their next round of financing, thus completely missing the boat.

B. Even if you say “no” to a company that is in fact going no-where, you risk alienating the entrepreneur to the point where they don’t bother contacting you when they create their next start-up, which will inevitably happen to be Google, Cisco, Yahoo, etc.

C. Saying “no” to any entrepreneur is not fun and creates enemies.  It’s like telling someone their baby is ugly or their child is stupid.   At best they will walk away puzzled at your inability to “get it”, at worst they will berate for your stupidly and declare a permanent pox on your house.

Net, net: no one likes to make enemies and saying “no” is a pretty easy way to do it.

Also See: Part 2, How VC's Say "No" Witout Really Saying "No"

March 24, 2005 in Venture Capital | 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.