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Feb 01

Saying No Sucks…

Posted by: Mark Solon        


Every single day, my partners and I have to tell passionate entrepreneurs that  we’re passing on an investment in their company. For me, saying “No” to someone who has poured his or her heart and soul into a start-up is hands down the hardest thing I have to do as a professional investor. Actually, it flat-out sucks. Imagine working in a maternity ward and telling every new mother that their baby is ugly. Unfortunately, it’s part of our job and something we have to do every single day.

Early in my career, I wasn’t very good at this. Actually, I was awful. There were many ways I would say “No”. There was the “Excalibur No” – like the legendary sword of King Arthur, I would tell someone that I would invest if they brought me a “Google” size customer. What I finally realized is that if they somehow actually went out and accomplished this, they wouldn’t really need our investment, would they?

"Pull this from the stone"

"Pull this from the stone"

Another easy way to say “No” was to hang the black hat on my one of my partners. “I really like your idea but I can’t get one of my partners to agree.” This “No” would allow me to maintain a good relationship with the entrepreneur by not passing personal judgment on their company. There were others too. There was the open-ended “maybe No” and the “maybe if I don’t answer their emails for a while they’ll go away No”.

I could always put this on Phil...

I could always hang this on Phil...

The problem with saying “No” as a venture capitalist is that there really isn’t anything to gain. You’re going to alienate someone who just might have the next great idea and shut you out of a future round of financing. Worse yet, risk that they won’t refer you to a friend running the next hot start-up in town. Finally, people generally don’t like others who criticize their work and it’s a quick way to make a long list of antagonists.

What I’ve learned over time is that entrepreneurs deserve (and appreciate) two things from professional investors in how we communicate our decision: promptness and honesty. The worst thing we can possibly do is string someone along or make up a reason why we’re not investing. Glenn, Phil, George & I regularly talk about this and we strive to be respectful and saying “No” as quickly as possible and to articulate our reasons as best we can. This doesn’t mean that these aren’t great companies or worthy investments, just that they aren’t right for us right now.

To help entrepreneurs understand, we evaluate hundreds of businesses every year and on average, invest in only three or four. The “No” that we deliver could be based on our concerns about the size of the company’s addressable market, the intellectual property, product (or lack of one), business model, strength of management team (the most delicate to articulate) or a host of other reasons. Venture capital investing requires a keen sense of pattern recognition and perhaps we see a sign of something from one of our previous failures. Sometimes “No” could even be that we’re currently working on four or five other opportunities at that particular time (along with managing a portfolio of twenty previous investments) and simply don’t have the bandwidth to devote resources to another significant due diligence process at that particular time.

We do however try and help every entrepreneur who approaches us. Whether it’s connecting them with savvy angel investors, introducing them to potential customers or or helping with their recruitment efforts, we try and leverage our network as best we can to be of assistance. We’re rooting hard for all of the regional companies we meet with and often reach out to them months after we’ve said no when something comes across our radar screen that might help them.

If only we had the wisdom of Solomon...

If only we had the wisdom of Solomon...

Finally and perhaps most importantly, we don’t claim to possess the Wisdom of Solomon. Investing in start-ups is more art than science. Bluntly, we’re often wrong. If we’re not passing on good opportunities, our diligence process probably isn’t rigorous enough. So if you wind up hearing “No” from us, please don’t despair, you’re in good company. I always smile when I read about the success of another company that we’ve said “No” to.


13 Responses to “Saying No Sucks…”

  1. avatar Pete Warden says:

    This all strikes such a chord. The shorthand I've been using for the 'Excalibur No' is 'Bring me the broomstick of the Wicked Witch of the West!'. It's incredibly common to get a response like 'Bring on an experienced co-founder/get to X number of customers/make $Y in revenue and I'll invest', only to discover after achieving that goal that there's more objections than just that.

    The biggest lesson I've learned in the last year is to take any qualified yes from an investor as a no and move on, not change focus to meet an artificial goal. My time's better spent focused on customer's demands, not non-committal investor's.

    • avatar Mark Solon says:

      I think you're prudent to take that approach Pete. Generally, if an investor is interested, you'll know by their body language. It's a difficult process for sure and one that my partners talk about regularly. I think it's easy for VCs to get desenstized to the process and we need to remember how much is riding on these interactions for each entrepreneur. Thanks for sharing your thoughts…

  2. avatar Mike Sparr says:

    Nice post Mark!

    You're definitely not alone. I've always wondered if there was some "VC academy" because most typically do/say the same things, regardless of geography. If you know/speak to enough of them, you'll recognize the patterns of professional investors as well. Some of your noted responses above fall right in line with one of Guy Kawasaki's post four years ago, acknowledging some of these patterns:

    I'd liken it to building great software; once you do it long enough, everyone designs to the same patterns over years of trial/error and lessons learned. For example, Cold Fusion had a pattern they called Fusebox, and this ultimately is what MVC is today (same thing, different name and technology). It's pretty cool to see the same patterns emerge in other industries/professions.

    Now tell us how you *really* feel when reading about the successes that got away. ;-)


    • avatar Mark Solon says:

      Couldn't be more serious about how I really feel Mike. We're not going to catch all the winners and realize that. On the other hand, the more companies that succeed here in the region, the better for all of us!

  3. avatar Mark MacLeod says:

    Really great post. I am pleased to say that you are expressing a view that is gaining in popularity with investors. Good stuff.

  4. avatar Peter says:

    A quick "no" is by far and away the best response we consumers of capital want to hear - it lets us get back to the effort of finding the deliberate "yes"

  5. avatar Phil Eastman says:


    I spent 17 years as a corporate banker and can really identify with learning to say no. It was hard and only made harder when I did not say no well.

  6. […] This post was mentioned on Twitter by Tac Anderson, David Crow, StartupNorth, Mark Solon, Web Startup Group and others. Web Startup Group said: StartupNews: VC: "Saying No Sucks…" […]

  7. avatar Dave Dupont says:

    Great post, Mark. As any good sales guy will tell you, a quick no is a very good thing. It takes courage and empathy, though, to take the approach you do. My hat is off to you.

  8. avatar Mark Solon says:

    It certainly isn't easy Dave and always a balancing act, but thanks for the kudos. Your message reinforces the importance of striving to do this part of our job well.

  9. avatar Mark Solon says:

    Your experience is precisely one of the reasons my partners and I talk about this all the time and try to be prompt and honest in our feedback when we pass on an opportunity. Countless entrepreneurs have told me that a quick no is much better than a protracted "dangle". Good luck with the new venture!

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