\n<\/p>\n
Hanging out with early-stage founders in the middle of a raise, it\u2019s hard to miss the frequent bemoaning of a lack of any response from many of the VCs they\u2019ve pitched to.<\/p>\n
Founders sent in a pitch deck or filled out an online application to a hundred venture funds, and\u2026crickets. The best they get is the occasional form letter \u2014 sorry not a fit for us<\/em>.<\/p>\n With VCs and angel groups spending so much effort telling everyone how founder friendly they are, how they encourage innovation, how they\u2019re the critical glue in the startup ecosystem, the lack of any response is disappointing. It\u2019s discouraging. Beyond frustrating.<\/p>\n Why can\u2019t they reply with even a single line that says, \u201cWe require a minimum $1M ARR.\u201d Or, \u201cWe only invest in what\u2019s hot at the moment (AI) and your [gaming\/proptech\/legaltech\/CPG\/social media] sector is off our radar scope.\u201d<\/p>\n The reason you won\u2019t get a useful response from most VCs is a combination of obvious and not-so-obvious reasons.<\/p>\n Let\u2019s start with a critical statistic. VCs and angel groups invest in less than 2% of the startups that apply for funding. That means 98% of the applications end up in the bit bucket.<\/p>\n Around 20% of applicants are invited to give a pitch. About a quarter of those get to diligence. Half the startups that make it to diligence receive an investment.<\/p>\n That means 80% of applications are rejected out of hand. They\u2019re spam clogging up the in-box. After reviewing thousands of decks, we can tell within 10 seconds whether an application is in the 20% group worth considering or the 80% that are immediate passes.<\/p>\n With hundreds of applications to review at a time where the vast majority are not serious contenders, we just hit delete delete delete and trudge through the pile until we find one that catches our eye. Sorry, that\u2019s life.<\/p>\n Despite the months of work agonizing over every word in your pitch, nobody read past the one sentence summary you put on the application. Listing a reason for the rejection would require reviewing the entire application.<\/p>\n Replying to everyone with something more than, \u201csorry, pass\u201d would multiply the amount of time it takes to weed through the pile. So most VCs don\u2019t bother responding.<\/p>\n Let\u2019s say the sweet spot for a fund is $5M checks at Series A in startups that have reached $1M ARR. Your startup at still at $20K ARR. You\u2019re clearly too early for this fund. So why not just send a template response with a checkbox marked for \u201chas not reached $1M ARR\u201d?<\/p>\n That would require that funds have narrow criteria that they never deviate from. And that\u2019s not how funds work.<\/p>\n When the former VP of AI at Google is pitching his new startup, that same VC that rarely invests without $1M in ARR may decide to invest in a startup that\u2019s not only pre-revenue, but in this case nothing but an idea.<\/p>\n VCs are opportunistic. They jump into any deal they think is attractive to them or their investors. So criteria are kept vague. They want to avoid declaring they only invest in startups with $1M ARR, then be called out as liars and hypocrites when they invest in that hot pre-revenue AI deal.<\/p>\n So instead of saying they invest $5M at Series A, they\u2019ll list their criteria as investing $500K to $20M in pre-seed through Series C to cover every possibility. They might say they don\u2019t invest in hardware or medical equipment since that requires special expertise, but they won\u2019t say they don\u2019t invest in gaming or legaltech or proptech even though it\u2019s extremely unlikely because, well\u2026for the right opportunity, they might.<\/p>\n Still, unless you\u2019re the VP of AI products at Microsoft and are buddies with the fund\u2019s partners, your pitch for a pre-revenue startup won\u2019t get past the intern triaging the pile.<\/p>\n When considering which investors to reach out to, don\u2019t just look at their official criteria which is vague and meaningless. Look at the actual investments they make: sector, stage, revenues, raise\/valuation, check size, lead\/follower, geography. If you don\u2019t fit with the other firms in their portfolio, don\u2019t expect they\u2019ll do anything other than delete your application within 10 seconds.<\/p>\n You\u2019d think that if a VC wasn\u2019t interested in your startup, they could say so. But what if next month your revenues 10x? Or Andreessen Horowitz decides to invest and now you\u2019re the hottest play in town. Or an early-stage gaming startup got acquired by EA for $2B and now every VC is in a panic to get a gaming-tech company into their portfolio. Good thing they didn\u2019t say no to your gaming startup!<\/p>\n The startup world changes quickly and it\u2019s easy to go from not to hot in the blink of a tweet. Unless it\u2019s an absolute no way, it\u2019s better to leave the rejects on hold instead of telling them to go away. Just in case. No reason to burn bridges.<\/p>\n As a startup mentor as much as an angel investor, I try to provide guidance to founders. If they\u2019re too early for our angel group, I want them to know so they don\u2019t waste time on the 99% of other angel groups that will also find them too early.<\/p>\n About half the time, the founders will reply with a polite thank you. A few will give more fulsome thanks for the useful feedback. Some will even update their fundraising strategy to something more likely to succeed. Wonderful. Mission accomplished. This is what I live for.<\/p>\n Another 40% will argue with me. They\u2019ll tell me I\u2019ve missed important points in their pitch. They\u2019ll reiterate the size of the opportunity. They\u2019ll ask if they can pitch again (and again) with a revised deck. They\u2019ll message me with updates every month to prove I\u2019m wrong. It\u2019s an annoying time drain. You\u2019ve had your shot and I\u2019ve provided feedback for why I wasn\u2019t interested; now please move on.<\/p>\n But it\u2019s the last 10% that are the hidden problem. They go beyond telling me I\u2019m wrong to calling me stupid a dozen different ways. Or worse.<\/p>\n I\u2019ve been called a racist multiple times for not investing in their startups. I\u2019ve been accused of refusing to invest in female-led startups. (I do, just not their theirs.) I\u2019ve been told I\u2019m a privileged jerk by people who know nothing about me or my unprivileged background. I\u2019ve been told I\u2019m a bad person, I\u2019m corrupt, I have no moral compass. I\u2019ve even been punched at a conference (fortunately not very hard.) All because I turned down investing in a bad startup.<\/p>\n The insults and abuse are only from a small subset of the founders I interact with, but they take a toll on my willingness to give honest feedback to people I don\u2019t know.<\/p>\n For VCs, the situation is worse. Founders go to social media to complain. A few unfortunate posts by frustrated founders can hurt the firm\u2019s reputation, especially for a small fund that struggles to get into hot deals.<\/p>\n So for investors, it\u2019s easier and safer just to say \u201csorry, not a fit.\u201d Or not respond at all. If the fund is interested in learning more, they\u2019ll let you know. If not interested, that\u2019s not their problem.<\/p>\n Their job is not to help the thousands of random founders who submit applications to their funds \u2014 it\u2019s to make money for their investors. They\u2019re looking for the 2% of standouts to invest in, not to mentor the 98% they\u2019re not interested in. There\u2019s no upside in providing feedback and significant risk, so few do it.<\/p>\n I know it\u2019s frustrating. I wish it were different. I wish VCs were clearer about their real criteria. I wish VCs and angel groups gave a specific reason for every rejection. I wish founders understood that no matter how annoyed and frustrated they are, no matter how much they disagree, no matter how stupid or unfair they think the investor is, the mature response is to say thank you and move on. Hurling abuse at people trying to help you hurts everyone. But wishes won\u2019t change anything.<\/p>\n My advice is to recruit a strong team of mentors who can provide you the guidance you need about who to pitch your startup to at your stage and how to navigate the fundraising process. In the end, that\u2019s the responsibility of mentors and advisors, not the job of investors.<\/p>\n Katie Deauville is the founder of the teleportation startup, S\u00fcprD\u00fcpr. She could\u2019ve used some good advice on how to build a startup instead of following Elizabeth Holmes and the Theranos model. Find out what happens in\u00a0To Kill a\u00a0<\/em><\/a>Unicorn<\/a><\/em>, the most fun you\u2019ll ever have reading about Silicon Valley.<\/p>\n Too much argument and occasional abuse makes responding to pitches perilous Hanging out with early-stage founders in the middle of a raise, it\u2019s hard to miss the frequent bemoaning of a lack of any response from many of the VCs they\u2019ve pitched to. Founders sent in a pitch deck or filled out an online application […]<\/p>\n","protected":false},"author":1,"featured_media":317867,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12034],"tags":[2214,19561,15057,6605,482,15142,75916,11231],"dealstore":[],"offerexpiration":[],"class_list":["post-317866","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-angel-investor","tag-angels","tag-feedback","tag-pitch","tag-pitching","tag-real","tag-reason","tag-vcs","tag-wont"],"yoast_head":"\nResponding Takes Time<\/h3>\n
Stated investment criteria are not the real criteria<\/h3>\n
No is not really no.<\/h3>\n
The biggest reason: arguments and abuse from rejected founders<\/h3>\n
\n