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When to Say No

We want to see lots of deals, but the challenge is to meet expectations. Given the volume of deals that we see on a weekly basis, we consistently need to be selective in determining which deals we will pursue and which deals we will pass on.  When I look back at our process, the “No” response often falls into 3 categories:

1. No because this does not fit our investment criteria

These deals are the easiest to say no to.  These are usually opportunities where we don’t see a domain expert, strong intellectual property or a large addressable market. We are disciplined about these three criteria. (At the same time, as early/seed investors we initially place far less attention to stuff that traditional VCs look at like financial projections, sales forecasts, etc).


2. No because we can’t add value

These deals are tougher to say no to because while the entrepreneur may convincingly make the case for their business, the opportunity is usually so specialized that we struggle to understand how we can add value in the process because it is so outside of our focus area.  As investors, our goal is to actively work with the team to capitalize on an identified market.  If we’re merely going to get in the way, or can’t leverage our past experience to help in the business-building process, then we are better off to stay out of the way of the entrepreneur.  We regularly meet entrepreneurs in this category that we like, but we know our own limits.


3. No because this isn’t a VC business

These deals are also tough to say no to because we regularly meet impressive entrepreneurs who have built strong businesses.  They have often started with little and have built a good cash-flow positive business.  While we’re greatly impressed by this accomplishment, we struggle to see the opportunity as being a high growth business or having strong intellectual property.  This certainly doesn’t mean that it’s a bad company or doesn’t deserve outside investment, it just means that it’s not a VC-type investment opportunity.  A VC-type investment opportunity means that we can share a vision in a great exit within a reasonable period of time. These deals are tough to say no to because often the entrepreneur has built their business in the face of much criticism and doubt.  This process builds great character and it’s always nice to see these types of people succeed.  While we can’t invest, we’ll try our best to help in other ways, as best we can.


Having been in this industry for some time, I’ve learned that it’s best to be direct and quick with our decision.  The last thing I want is to waste the entrepreneur’s valuable time with a passive aggressive approach.  This certainly helps no one.   A quick "No" is much better for everyone than a long "Maybe" leading to a "No".  (And "No" doesn’t always mean no forever. We have been known to revisit opportunities when conditions change and then make an investment).

Evaluating deals is at the core of our business so I always encourage entrepreneurs to submit their opportunities. This allows us to start a dialogue, explore partnership opportunities and maybe say "Yes" to many great ideas.

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