I’ve spent a considerable amount of time playing angel investor over the years which has given me the chance to meet many great entrepreneurs. In general, when an entrepreneur contacts me, he/she is looking for money, advice or both. Generally speaking, I make a quick determination if the people are some that I might be interested in working with; whether or not the idea is something that I can actually add some value too (an increasingly small set of things, as it turns out); and, oh yeah, whether or not I can make any money by investing in it, if that’s appropriate. About a third of the time, I immediately say “no,” because it doesn’t match up with any of my basic criteria.
The other two thirds of the time, I spend more time with the entrepreneur to understand the business as best I can and as quickly as possible. After 35+ angel investments, I should be able to determine the value of a startup quickly, yet, it doesn’t actually seem to be getting any easier. Or, at least, I’m not getting any better at it. Of course, the amount of time I spend coming up to speed with the team depends on my interest and varies quite a lot. In the end, the vast majority of people I talk with ultimately get a “no.” That’s just how the numbers work out. I can’t invest in everything.
In almost all cases – there are those who take a “no” like I said their mother is ugly and are complete assholes about the situation – I do my best to be supportive and helpful in my rejection, explain why I’m not interested and almost always try to connect the entrepreneur up with someone who might be better equipped to help or might be interested in investing. But, it’s still a rejection and it’s tough to take. It’s in how the entrepreneur handles this situation, that I learn more about them than during any of my previous discussions.
Once in a great while, someone will hang up on me or clumsily end a face-to-face meeting with some poor excuse. More likely and if email has been the primary form of communication, I might never get a response to my “no,” which is also a non-response to my offer to hook the person up with another potential advisor or investors. Sometimes, the entrepreneur digs in his or her heals and pushes even harder, thinking that they can force me into changing my mind. Often, pleading, in various forms, takes place.
I’m here to tell you folks, this is all bad. If you’re an entrepreneur (or any one doing business), you should treat each relationship you establish as a long-term, important one. You just never know when you’re going to need it. Sometimes you need it and you don’t even know it – like when another investor calls for an opinion or a reference. I don’t hold a grudge, but I’m not shy about sharing my thoughts about things, especially with people I have an established relationship with (there’s some recursion here, I think).
I’m making it sound like very few handle the situation well. Many actual do handle themselves wisely and professionally. What do I mean by this?
- They politely ask “why?” to fully understand my decision without trying to convince me otherwise
- They thank me for the time I invested and for my consideration of the team and idea
- They usually ask if I mind if they can engage me for advice or guidance in the future or if they can send updates on what is going on with their new baby.
Yes, for the most part, it’s political and maybe even pandering. It’s also smart. Some people handle it so well, I question my decision not to get involved. Handling it well gives me the impression that the entrepreneur might have the right stuff to be a great CEO. I’ll take that over a great idea any day (although both is nice, obviously). Even if I don’t get involved, that’s what I’m going to tell others when asked.
I’m not trying to be the Emily Post of startup venture engagements here. But handling this basic stuff right can get you very far. There will be MANY more “no’s” in your future. They are always harder to handle than “yes’s.” If you can handle them well, you’ll demonstrate what you can do when things are not so good. A much more important skill than what to do when things are going well. And that’ll get around.
So you mean that when you said no, and I cried like a little girl, you didn’t find that endearing?
The world is a cruel, cruel place 😉
You, my friend, should be held up as an example of how to handle things. You
let me keep my Disruptor Monkey medallion, which I still have! Total class
How you do one thing is often reflective of how you do many, if not most things. Thanks for sharing this point of view from the other side of the power dynamic. All relationships have a power balance/imbalance between them that gets defined, refined, and settled with occasional readjustments over time. Rarely is there perfect equilibrium, but how either party handles their side of the imbalance is the true mark of character. Giving and handling rejection with grace, optimism and even humour can literally turn a frown upside down and gives nourishment to a relationship that could otherwise wither on the vine if handled differently.
Well said, Julian.
I just came across your blog Will, and I’m glad I did – change a dozen words here and this could easily apply to salespeople as well. The scarcity of people selling (themselves and their idea as you’re discussing, or a product/service) who understand that this kind of reaction is a far bigger problem for them than the “no” they just got is mind boggling to me.
Thanks for the great post/insights!
Thanks! Your so right and I should have pointed that out. This same stuff
applies to sales people. Actually, it applies to everyone, no matter what
one’s walk of life when you think about it. The people we are impressed with
and those we enjoy being with are those that handle themselves well,
maturely and, even, professionally.
I am glad I came across your LN profile accidentally which led me to your Angle List, and blog. I have yet to come across a more public (so to speak) angel investor. And I have enjoyed reading your articles as I find them highly informative, specially for a start-up entrepreneur such as myself.
No, I wouldn’t get upset from getting a ‘no’ from an investor, least of all from an investor who actually took the time to consider my my idea! If I couldn’t handle rejection I think I would have stayed someone’s employee. I have a couple of questions, if you don’t mind: 1. You said in a later post that you invest in second rounds so as to minimize risk. Is this true and are you stringent on this rule? 2. My plan is to launch a mobile commerce platform that competes against Amazon & no it’s not a “me too” idea I assure you. Is this something you would be interested seeding? I am interested in an angel for my seed with operational experience.
Abdi, yes, I’m generally not the first investor in or even a very early investor. I do focus on later seed rounds, though. If you’d like, I’ll still take a look at your deck. Send to will at herman.com.
Thanks Will, I would love to send you my plans but only if you would consider investing. I don’t want to send just so I can feel better about myself cuz of your “no”. I don’t need to be consoled like the people you mentioned. 🙂 May be I will reach out in Series A. My plan, as it stands right now, is to get to cash-flow positive in an early stage, A or B; not to keep raising funds C+ and I think our business plan allows us to achieve this since we won’t play the “fremium” game.
If you would I’d appreciate if if you could tell me why some VCs insist on more than one founder? Is it honest on their part and that they think 2+ founders (with founder stock) is better than one? Or is a trick to play divide and conquer something they can’t do with one founder? I ask because I can’t think of anything more available than talent these days. It can hired rather easily, at-least outside of Silicon Valley, so why should a founder be instructed to dilute himself? To be specific: I am a lone founder. I have “put together” my core team. But I intend to give them stock options, not founder stock.
Your call on sending the deck, of course. As you read in my post(s), I am not a series A investor.
The multiple founder things is simply driven by the numbers. Multiple-founder companies have a substantially higher success rate than those started by individuals. It has nothing to do with dilution.
WRT dilution. If you create a successful company, there will be plenty to go around. If you don’t succeed, like many one-person startups, zero times anything is, well, nothing.
I appreciate your answer. Thanks.