When a VC turns you down

Earlier today I had one of those unpleasant moments with this VC gig. The personal attack.

That is when you turn down an entrepreneur and that person goes “chucky”. Fortunately it doesn’t happen much. In my experience it happens maybe 1-2x a year.

I try to keep a thick skin about it. I know that the founder is just super passionate and is frustrated. For some reason I end up saving those emails when I should probably just trash it.

But that experience made me think about the broader issue. Namely, the response when a VC turns you down. Because statistically, VCs are turning down people a bazillion times more than the amount of times we say “yes – let’s go!”

As a former entrepreneur and now a VC, here are some thoughts I’d like to share about getting turned down.

1 – Don’t go on a personal jihad no matter what. Even if you feel you were mistreated I wouldn’t go on the personal attack. At the very least, sleep on it first – you may regret it. But in the end it’s bad for everyone and just not worth it. I would encourage you to give feedback to that VC. This is a two way street. Keep it constructive and helpful.

2 – Many times VCs get it wrong. Plain and simple.

Quick story: we invested in a company called thePlatform based in Seattle. Several firms passed on that investment and we decided to invest anyway. We loved the team, technology and strategy. Less than a year after our investment, the company was sold to Comcast and it worked out great for us.

We have also had the opposite happen. We pass on a company and then it turns out to be a winner (happened more than once unfortunately).

And of course, we invest in some companies that may not work out -unfortunate but part of the risks of startup investing.

3 – Don’t give up. Because of issue #2 above (ie VCs get it wrong) you can’t give up. You gotta kiss a lot of frogs, meet a lot of firms & people and find a match. If you believe in what you are doing then you shouldn’t shrug your shoulders and kick the can.

Yet another story: I met with an entrepreneur friend of mine last week who told me, “I know if I change and have our company go in a different market, I can get funding but I won’t be happy about it”. My response, “startups are hard already. don’t change it to a company you don’t like. you won’t be good at that and you will hate it”. i firmly believe that.

4 – Don’t give up on that particular VC. Sometimes you just hit it off with an entrepreneur or with a VC.

There have been times where I like the entpreneur much better than I like his/her idea. I know they have something absolutely fucking brilliant in their mind & heart that just hasn’t come out yet. In that case, we shouldn’t give up. We should stay in touch and try to figure it out. Let’s not fund the wrong thing, let’s figure out the right thing to work on. Venture capital can be expensive source of cash but your time is even more important.

Perfect example of the “don’t give up on that particular VC rule”:

A few weeks ago, Avner Ronen (who is the ceo/founder of Boxee) presented at our annual shareholder meeting. In his presentation he mentioned that we turned him down 3 times before we made our investment. Now that isn’t typical but I’m so happy that we both hung in there together while Avner & Boxee refined their strategy & product.

5. Listen to the feedback and figure it out. If you are getting 100% of the same feedback from VCs, your advisors and your friends then you gotta pay attention to that. Take a breath and be intellectually honest. Am I working on the right thing?

6 – Stay cool. It’s really not the end of the world. I promise.