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.

#VC & Technology

Comments (Archived):

  1. vruz

    Isn’t this a rule of thumb for almost everything in life as well ?Every decision you’re confronted with. Oftentimes, saying “yes” to one thing is equivalent to saying “no” to a hundred other possible choices.

  2. ErikSchwartz

    As one you said “no” to I can report that the feedback that came with your “no” has helped us immensely. Your input has shaped the product we’ve built and made us re-examine a bunch of assumptions we had made about the business the product and the team.We got told no by VC’s about 10 times. Most of the time you never get a “no”, you just get silence. Sometimes you get a “no” that doesn’t really help. Your “no” helped us make a better product and eventually get funded.Thank you for that.

    1. fredwilson

      erik – i only wish i could provide everyone with the experience you had!

  3. amit

    The answer “No” is the 2nd best answer one can hope for (“Yes” being the best.)In my experience -the most common answer is no response, and the worst answer is “Maybe”.a “No” with an explanation is even better, but i’d take a a quick flat no over the other alternatives (other than yes) any day.thanks

    1. vruz

      Perhaps because “yes” and “no” in your case are actual information and that helps to move on for bad or good, but “maybe” is more of a delayed response in time, not an actual answer, more of a non-answer.Like in the Oasis album title “Definitely Maybe”… eternally delayed judgement is not of much use.

  4. Chris Phenner

    Why say no?Why not tell someone what you wished you saw? Why not tell someone what they could do to make things better? Why not suggest a specific deliverable that someone can provide (including a different founder) to improve? Why not make an introduction?Fred and I met and I received feedback (that I did not take as a “no”) that the market for my idea may not be large enough. Perhaps I am naive or perhaps Fred was being polite, but nowhere in our hour-long conversation did I hear “no” in what was said.I’m sure “no” is a one-word metaphor for “managing expectations” or some loftier term, but in my experience, the best way to say “no” is not to say it at all. Offer a “wish list item,” an alternative approach, or perhaps someone else who can be helpful. Such a “re-routing” may not always be available, but it will likely take just about as much time to type and/or speak, provided the willingness to give thoughtful feedback is there.

    1. Andy Freeman

      Because he probably hasn’t looked into every issue; knowing one reason for “no” is not the same as knowing that there’s only one (or a few) reasons for “no”. If he says “fix this and I’ll fund you”, he’s committed.

      1. fredwilson

        andy’s right – it’s hard to say “do this and we’ll fund you”. you don’t want to set expectations that way. it’s best to say “this is a problem for me” without the explicit committmentfred

        1. John K

          I wouldn’t ever hold you to this Fred, but what if a team came back to you a month later and said, “we fixed all the things that turned you off”. Would you look again?

        2. Andy Freeman

          That said, how often do you run into an opportunity that has one fixable problem and what do you do?

  5. Peter Bell

    Back when I was looking to do a series B in 2000, it would have been great to get some “no’s”. One of the dissatisfactions was that most firms we talked to wouldn’t just come right out with an objection – it was all “maybe’s”. The general rule always seemed to be “lets not say no – that way we may be able to get back in if the revenues start to ramp or something else good happens”.Has something changed in the industry since I’ve converted to bootstrapping, or are you planning on starting a new trend?!

  6. Daniel Markham

    Great article.I was talking to a perspective partner a couple of months ago and got a no. She basically said “Look — it’s a great idea, but I just can’t get excited enough about it to join into a partnership.”That was great feedback. Simple nos are fine, a sentence or two is terrific. While nobody can give up on an idea but the entrepreneur himself, the more honest feedback we get the better decisions we can make. That’s good for everybody.

  7. Jerry

    Do you remember when I used to make people cry saying no?Yeow.

    1. fredwilson

      you took honesty to a higher level!

  8. Michael Bailey

    Well Fred – you are either going to invest in the company, or you aren’t. Telling the requester NO as soon as possible let’s them continue their search with other firms.I agree with the comments above that saying “maybe” or dishing out “silence” are the worst things that VC’s can do.I think that “maybe” messes up the flow the worst – From the requesters point of view, if there is even a slight chance the the VC firm is considering the proposal, then things slow down while waiting for a response.I have heard “no” a bunch in the last year, but mostly I have received “silence” – the silence makes me nervous because I figure that my idea is a good one, and that they’re asking around with people they know if duplicating my process/service is possible.Of course, I remain hopeful when I can read the headlines on TechCrunch and see others getting funded for ideas smaller than mine. Persistence is a blessing and a curse.

  9. Steven Kane

    “I hate people when they’re not polite.”– “Psycho Killer” Talking Heads ’77

    1. fredwilson

      “watch out, you might get what you’re after” — “Burning Down The House”Speaking In Tongues

      1. Robert Seidman

        “And you may find yourself in a beautiful house, with a beautiful wife”–“Once in a Lifetime”Remain in Light

        1. fredwilson

          Wonderful. I wonder how many talking heads fans we’ve got in this community

          1. Greg Pass

            “Try not to look so disappointed. It isn’t what you hoped for, is it?”– “Memories Can’t Wait”Fear of Music

  10. JimB

    The same goes for recruiting. If a job candidate is not going to work a gracious “no” with some brief constructive feedback should happen sooner rather than later. Large corporates are still really bad at this. They can spend weeks and weeks pondering a hiring decision and then not even have the courtesy to do a follow up. Silence just says you are not even worthy of a one line e-mail

    1. DAR

      +1I’ve worked a lot of places in my career, and consequently have done a lot of interviewing. And I have to agree, most companies (both large and small) are extremely rude about saying no – or even getting back to you at all!That *really* ought to change. It’s extremely unprofessional in my book, and reflects badly on the organization.

  11. Joe

    I think you should have everyone ask you NOT to invest in their company. Then you can spend all day saying Yes! It would be very refreshing, I think.

  12. Fred333

    If you did that then you would have time to actually find the business ventures worth investing in.

  13. NelsonMinar

    Speaking as an entrepeneur, “no” is a much better answer from a VC than the usual “maybe, could you give us a bit more data on your business? and we have this technology person we’d like you to meet. and could you update us next month with the latest business metrics?”. Naive entrepreneurs tend to believe the VCs are sincerely interested when they’re just being strung along. It’s one of the unpleasant lessons a founder has to learn.

  14. Don Jones

    Great post. Sadly, the venture capital industry is infamous for the never-ending maybe…

  15. ashkan karbasfrooshan

    good post, but it’s actually harder to say no when you’re an entrepreneur faced with 1000 and 1 growth opportunities, employee requests etc…

  16. kareem

    I met with a VC recently who was relatively new to the job. She gave us explicit feedback on what she didn’t like about our business. It was the most refreshing and helpful meeting I’d taken with a VC, and I told her so.You’re in a service business… if you help out an entrepreneur now (and not just blow smoke like 99% of VCs out there), that entrepreneur will be more likely to want to work with you in the future.

  17. Mrinal

    That is so good to hear Fred – very very few people think like this and then do that. When I was “vocationally challenged” during the downturn, I had the same request from companies/recruiters – 1) tell me no – at least something and then if you can 2) a why so that I can learn and get better.I think the responsibility lies on both parties and more with the one listening to the No – if they can make the person giving feedback comfortable about it, you will increase your chance of learning and practicing kaizen. A good No almost is better than a Yes – you have a problem to solve and you will probably come out stronger if you have the right attitude. Smooth sailing never teaches you anything.

  18. JA

    I wouldn’t mind seeing a Fred Wilson ‘anti-portfolio’ — a la Bessemer –. Let’s see the deals you passed on that you wish you said ‘yes’ to.

    1. fredwilson

      How far back do you want me to go?

  19. Mark Waterstraat

    Fred. Thanks for the insight you so willingly and frankly share. Our (hopefully soon to be) capital partner tells us their decision process goes, in order, People, Product, Market, Valuation. An investment opportunity must pass each criteria in order to move on to the next. If you pass all four and get through their underwriting committee, you get funded. Do you use a similar process, or will you share your high level criteria?

    1. fredwilson

      We don’t have a process that is written in stone like that.Clearly the people are the most important followed closely by product andmarket.And we do care what price we pay.I wish I could tell you that we have a specific way that we look at each andevery deal, but we don’t. Each one is different and we analyze themdifferently.fred

  20. ldeakman

    As an LP (with Fred and many others), we are in the same position of constantly saying “no”. I do try to look at all of the PPMs and presentations but we are often overwhelmed by inbound interest. I’ve tried a thousand different ways of saying “no” to VCs and I’m sure all you entrepreneurs will be glad to hear that they (the VCs) are faced with the same hunt for capital from LPs and that they hear a lot of “maybe’s” and just don’t get answers from many LPs. Most of the time it’s not the market or the business plan that I’m shooting down but the team. It is very difficult to say no because you can’t get conviction around a person or their partners. So when I do say no, I try to be bluntly honest and I’ve found that is the best way of stopping the bleeding. So far, I’m pretty glad that I said “yes” to Brad and Fred. LindelYoure talkin a lot, but youre not sayin anything. – psycho killer

    1. fredwilson

      I love the Talking Heads quotes.This might be a fun thing to keep up in the comments of this blog goingforwardfred

  21. SCP

    Thanks for being human. I’ve been on both sites and the truth is always better. Be strong. Be direct. Be yourself.

  22. Aruni

    As others have said, ‘no’ is 1000 times better than the neverending ‘maybe’ answers that many VCs give. I’d rather hear ‘no’ because of xyz (even if it’s a brief reason). Just because I hear ‘no’ I don’t interpret that as ‘never.’ In many cases, it means not right now. I also appreciate this answer from a potential customer because otherwise you can spend your life trying to get them when they really have no intention of working with you. When I have a prospect tell me this I thank them because I can put them on the backburner and focus my attention on other areas.If you are not confident in the founder/CEO then I think it’s perfectly fine to tell them that by saying something like “I think you need to add xyz skills to make this a deal one we are interested in evaluating further.” A true entrepreneur (IMHO) will say ‘OK, thanks let me work on that and I’ll get back to you if it makes sense.’ I think many entrepreneurs think they have to force a fit (just for $$) where there just may not be a fit and just like in many relationships if you force a fit in the short term…it can go sour b/c both parties weren’t at least 95% bought in on a) the company, b) the mgmt, or c) the market. Make friends, keep them posted, and if not this deal then another deal you are involved in the future might make sense and be a better fit.

  23. Denny K Miu

    I wish there are more VC’s like you. My personal experience is that very few of them are capable of saying NO.” … in a perfect world, if an idea from an entrepreneur is not ready for funding, VC’s should simply tell them to go away and come back when it is ready. But the problem with VC’s is that … while their instinct might tell them that I stink, their intellect would convince them that they might miss out on the next Google. So VC’s will never actually tell me to go away. Instead, they will hover around and keep me at a sniffing distance until they are convinced that I will never get funded by one of their neighbors.”How to Turn Your VC into Your Worst Enemy…–Denny–

  24. Adam Benayoun

    I prefer you telling me I cannot run the company than waiting for your forever response on investing into my company.At least if after fews “no” with the same reason I Cannot run the company, I’d start to look for someone who could run the company.That’s better than “waste” your time trying to get a VC to invest without knowing why they all say “no”

  25. Pete

    Hi Fred, I agree with everything you said. The only thing I would add– if you’re going to turn an entrepreneur down saying that you don’t have confidence in the entrepreneur, then I think you owe that person some constructive critcism. I’m sure that you do this, but you didn’t mention it in your post, so I thought I’d comment.It’s one thing to turn down an idea or a market, but it’s a pretty harsh blow to turn down a person, and tell them to their face. At least explain to the person why there is no confidence: i.e., lack of track record, questionable hires made to date, etc.Pete