No, Nah, Nope, Non, Nae, Nyet......
Added by julian on Sat 18th Feb, 2012 16:38There is never an easy way to say "No".
Most VC's have thousands of applications every year and the percentage that get funding are in the low single figures. All VC's have a screening process which is normally managed by the lower ranked employees in the firm such as Associates and Analysts or even Interns such is the volume, so a "No" answer is all too common.
This can be hard to hear for an entrepreneur who has been building a company around their dreams and we don't take saying "No" lightly but you should have a thick skin and keep going until someone says "Yes".
In any rejection we try to offer some advice but it can take time (of which we all have little enough) to offer an in depth reason of why an application was terminated so the reason may be brief. The other side of this is that the entrepreneur will of course try to argue the points that you have stated of why you will not invest or address those points, but still the answer would likely be 'No'.
For those reasons we are likely to give a neutral response without reference to specifics.
There can be a multitude of reasons why applications are rejected, here is a selection of some and certainly not all the reasons:
1. The fund is committed
2. The fund is almost at the end of its lifecycle
3. Your business may not be in the desired sector or the VC may already have enough exposure in that sector
4. Geography issues. VC's like to be involved in their portfolios and if you are too far away a small firm would have difficulty managing that investment.
5. There may be a 'hung jury' on your application by the voting board.
6. There could be a huge backlog of applications
7. There are key primary reasons wrong with the applicants venture, usually around team, traction, product, growth, revenue model or other.
8. The application is so poor (and has not heeded any application guidelines) it verges on spam and is not even replied to.
8. Your deal can get stuck in the VC's hierarchy between an associate and a partner
In a boutique VC firm like EC1 Capital you are dealing with decision makers directly, so we try to get to a 'No' quickly so you can move on. A lot of VC's will feign interest and keep you holding on in case you manage to raise other funding or some other breakthrough in your venture.
If we want to get back into the deal because of some progress you have made or general interest from the investment community, either we will ask you or you must feel free to reconnect with us letting us know what you have achieved. We think that's a fair deal.
Tweet