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Funding VC Feedback


Entrepreneurs are from Earth; 

and VCs are from Venus

What investors say and what they really mean

When you’re in business, communication is critical.

If sales ignore marketing or finance doesn’t talk to operations, carnage ensues. And it ain’t pretty.

Investors and entrepreneurs generally don’t communicate well with one another. An investor can say one thing, and a founder can hear something else entirely, and vice versa.

As someone who has been on both sides of the meeting room table, consider me your tour guide into the often-baffling world of investor-VC relations.

In this playbook, I’ll help you understand what investors really mean when you’re presenting to them.

Parlez vous VC? You’ll be fluent in no time!


Entrepreneurs and VCs think differently

Founders and investors often are on different wavelengths as they want specific things from a deal.

An entrepreneur is interested in the capital and connections a VC can offer them. Conversely, a VC wants results and returns from a prospective deal.

This means misalignment is a common thing. As an entrepreneur, it’s only natural that you think a potential investor is as excited about your product or service as you are. However, a VC is more interested in keeping their options open.

Entrepreneurs assume by default that VCs want to invest. VCs assume by default that they won’t be investing.

It doesn’t help when investors are intentionally vague. If a VC says, ‘it’s a hard no’ or ‘let’s step towards our IC,’ you know where you stand.

However, an ‘I’ll get back to you’ or ‘We’ve not made a decision just yet’?

Could go either way.


The entrepreneur/investor dictionary

So, when a VC says something after a pitch, what does it really mean, and how should you react?

I’ve put together both best-case and worst-case interpretations of what may be said. The one you choose will depend on how the presentation went as well as the voice, tone, and body language of the VC in charge.

Think of it as a multi-million dollar ‘choose your own adventure’ book. 

Rather than just repeat it all here just take a look at the slides.  One piece of advice is try to be as objective as possible when you interpret things.  Talking it through with your co-founder, team, mentor or friendly cat should help...


How to get the answer you need

It’s essential to manage your expectations when you’re on your fundraising journey. If you have 200+ investors to target, you want to know where you stand ASAP.

If an investor is going to pass, you want them to do it quickly, so you can move them to the bottom of your pipeline and move on to the next VC.

I always like to follow the AIDA model to get an answer:

  • Attention. When you send a pitching email to a prospective investor, you want to make sure you have their attention. Ask, ‘can we connect by Zoom so I can walk you through our business in more detail?’

  • Interest. After the pitch, always ask if the investor is interested in following up if you’ve not heard back or got a vague response

  • Desire. If you’ve had two or three meetings and things are going well, ask what you’d gain by working with the investor. The answer they give will provide you with a solid feeling of whether they’re in it for the long-haul

  • Action. Now you want a verbal commitment and a rough investment value. Once you’ve got this, you’re one step close to a term sheet and a signed contract.

And it goes without saying – it’s okay to be direct, but always be polite.

News travels fast in the VC world. You don’t want prospective investors to think you’re a prima donna, especially if you still need to pitch to other investors.


I got rejected - now what?

Even if you get a pass from an investor after pitching to them, you should get a reason for them doing so.

My personal opinion? If you’ve invested more than two hours in a meeting with a VC, they owe you at least five minutes of detailed concrete feedback (some would say more).

This is valuable information you can use to help refine your pitch and potentially even your business idea.

There are four different rejection reasons:


1. Your business is out of scope

This is when a VC tells you that they don’t invest in your sector, they think you’re too big or too small, or there’s a portfolio overlap.

Sometimes VCs will use this as an excuse when really, the problem is something else. It’s usually easy to spot when this is the issue, and it’s ultimately up to you whether you want to press things further or take the feedback and move on.

If you’re getting the same feedback repeatedly, you need to go back and review your VC target list, as chances are you’re targeting the completely wrong companies.


2. Your pitch isn’t ready

If a VC tells you that they don’t know what problem you’re solving or who your target customer is, it’s a sign that your pitch and deck is undercooked.  

When you get this feedback, you need to go back and review your strategy and positioning.  Add depth to the pitch.  Possibly an appendix page or two.

This issue can often be the fault of the investor. If you’re asked to pre-emptively pitch, you’re likely doing so before you’re ready.  However at later stage you really should have the pitch sorted out, however your product and business traction might not be there yet.


3. Your prospective investor can’t lead the deal

This feedback comes when an investor is happy to support the investment, but they don’t want to lead it. Sitting on the fence in business will only get you one thing. Splinters.

If this is the case, it’s vital to discover why the VC can’t commit. You can then decide whether you want to keep them in the loop in case things change or cut them loose (by essentially parking them for now).


4. Your business is too much of a risk

This response might feel like the most disheartening, but it’s the most insightful.

A VC will pass if they think the risk of your scaleup not hitting the big time will outweigh the reward if it does.

It may be that:

  1. They don’t think your strategy will work

  2. They don’t think the execution of your business plan will work

  3. They’re concerned you’ll not use investment in the right way

  4. They don’t think they could work with you or your team

Let’s look at point four in a bit more detail. Typically an investor won’t out-and-out say if they would rather get stuck in a lift with their worst nightmare portfolio company than work with you – they’re not heartless. They may even be able to suck it up if they’re getting a great deal.

But for the most part, they would prefer not to work with a founder who’s a potential liability.

It may be tempting to go to bed with a bottle of Jack Daniels and cry yourself to sleep if you get this type of feedback.  However, take the critique, run with it, and use it to improve.


In summary: No means no

Growth investors are a funny old bunch. I should know; I’ve worked directly with many and also call several my friends.  The bottom-line is it's important to be flexible yet firm when dealing with VCs. Ask politely for feedback and use it to refine your pitch, target list and strategy.

Sometimes if there’s an investor you’ve got your heart set on working with, you are happy to invest time in them.  But if that isn't reciporated you have to 'go fish' elsewhere.  Be brutal and move on if it looks like they’re just playing you along. There are a lot of other great investors out there.

One final thought: A PSA for VCs

If you’re a VC reading this, don’t be a dick.

Be transparent and fair to the startups and scaleups that pitch to you.

If you like their idea and want to know more, say so as soon as possible.

If it’s a no, tell them right away and give them good feedback.


What's next?  Negotiating tactics...

In the next article, we’re looking at evaluating and negotiating deals. You’ve got an offer? Don’t pop the champagne just yet.

Here’s how to get the best out of a prospective investment.


A complete discussion on how to understand start-up pitch feedback from VCs and evaluate term sheet offers. From Jonathan Bullock, ex Google Chief of staff & SoftBank COO

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