Saying No

That’s what I do all day. Every day. Dozens of times a day. I try to reply to every email from every entrepreneur who sends us an investment opportunity. I don’t achieve that goal and sometimes I don’t even get close.

But at least half the time, probably 2/3 of the time, I just reply with a no. And I try to explain in each and every one why the answer is no. Because email is time consuming, the explanation is often one or two lines. Something like "it doesn’t fit into our investment strategy" or "we don’t invest in content businesses" or "it’s too early state" or "it’s too late stage". I realize that these reasons are barely useful. But at least it’s better than "no thanks".

If we take a meeting, then the need to explain goes up. I took a call yesterday from one of my oldest friends in the business. He’d spent a bunch of time in the past month looking at a deal I sent him. He and his partners decided not to invest. He spent ten minutes explaining why. It was incredibly helpful to me. I then asked him to call the person who runs the company and do the same thing. Frankly, it’s a lot to ask. He’s going to repeat himself and the person on the receiving end may not appreciate the message. It’s hard work saying no correctly.

But he’ll do it. And he’ll do it well.

Saying no correctly is really important in the venture capital business. Saying it quickly on things you are not going to do is the first and most important thing. But saying no on the things you’ve spent real time on is equally important. And the hardest part is telling the truth.

What do you say if the reason you don’t want to invest is you don’t have confidence in the person running the company (the person you are saying no to in most cases)? Do you tell them that? Or do you make up some other reason?

I’ve tried every way to say no and my belief is the truth, no holds barred, is the best approach. If you don’t think the entrepreneur can run the business, tell them that. If you think the market is too small, tell them that. If you think the competition is too tough, tell them that. Many entrepreneurs will take a "shoot the messenger" approach and be annoyed or upset with you. But that is vastly preferable to blowing someone off with a "my partners weren’t into it" or "we just couldn’t get there".

Saying no is never easy, but it’s part of what we do in the venture business. So you might as well figure out how to do it right.