Comment by lisper
2 years ago
It's not so much that "yes" means "no" but that VC's never actually say no, and it's easy to understand why. Whether or not they actually fund you, they always want you to think that they are going to fund you because that way they hedge their bets in two ways. First, if they learn new information (like if you suddenly start to get traction) they can change their minds without losing face. Second, and more importantly, as long as the answer is actually no you are potential competition for some other company that is actually in their portfolio, so they want you to think that you have a shot with them so you won't pursue other opportunities as aggressively.
The only thing that actually means "yes" in VC land is when the check clears.
Top tier VCs will definitely tell you “no” and they’ll often get there quickly.
It’s more often the small funds, the inexperienced family offices, and the junior associates that don’t have authority who string companies along forever. They don’t have as much authority or funds to actually work with, so they have a lot of time to string you along.
Lumping all VCs together really doesn’t lead to accurate descriptions of how the industry works.
This is the most accurate comment I've seen here. Sequoia, Benchmark, Kleiner, etc. will all tell you "no" and why with minimal turnaround time. The same is true for second-tier players like Craft, smaller shops started by breakaways from the big firms, and scouts. Good VCs are professionals and have no interest in wasting your time or theirs. A "no" now never precludes future participation anyway; they don't need to string you along for that.
Hmm, my experience with one of the largest investors in NL was a full verbal 'yes'. The investor was actively involved in the hiring process (that is how I got in). A founder put in his cash (think a small apartment) for a lower single digit percentage of agreed valuation. I signed for something smaller / similar but without bringing in cash.
In reality the money never arrived, they forked in few times 250k. The other investors who bartered a deal all brought in their share. My takeaway is that even the most reputable investor has absolutely no limit in saying yes and doing no.
The motivation for everybody was greed, and that was buzzing around due to the fact a large investor was involved. They know that and they used it. But in the end in this world signed contracts and wire transfers are the only credible thing.
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Which actually reinforces the grandparent's point. Sequoia, Benchmark, Kleiner, etc. can say an actual "no" and you'll still go back to them because they're...Sequioa, Benchmark, etc. You'll go back to them, because its a huge signal to prospective buyers, potential acquirers, partners, etc. that you're being funded by a top tier VC.
> Good VCs are professionals and have no interest in wasting your time or theirs.
"Good" VCs has less to do about professionalism and more to do about pedigree. Professionalism and "good"/"bad" VCs are not mutually exclusive things.
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People get pissed at entities that act irrationally, but the really good entities rarely act irrationally, and have a feedback loop to attempt to act as rational as possible.
But the people who are in the bottom 80% tend to match with others in the bottom 80% as well. And so this kind of story resonates well, to the tune of 200+ upvotes.
Not criticizing anyone, but it's a trap that people fall into, both founders and VCs, employees and employers. Where the perception of these entities is biased by inexperience.
Redpoint will also give you a straight no and share a lot of their rationale.
You can't be mad at the no because you learn so much from their response that you feel thankful.
If they run down your clock because you think a check is coming, their other company can hire your former employees.
I'm not going to say this has never happened, but I think it's a little naive to think that this is the common path. In my experience, the first option OP presented (hedging bets and wanting to save face) are incredibly common.
Naïveté is when someone assumes good outcomes from bad situations.
What I'm exhibiting is probably more correctly described as cynicism. I've worked for a few startups that were sure they were hearing 'yes' from VCs and we ended up running out of money thinking a check would come any day now.
There's an old saying, "I'll believe it when I see it." Cynics and startup employees expanded this to, "I'll believe it when the check clears."
And then there's me over here, who knows you can claw back a check that has 'cleared' for about 30 days, saying "I'll believe it a month after the check clears."
Disagree, I’ve heard “no” from dozens of VCs. They sometimes even give a post hoc rationalization.
Serious VCs often will say no, and they'll say it quickly.
Honestly I prefer the approach of being extremely straightforward with expectations. Make your pitch, but also make it clear that you aren't interested in playing games and would prefer a clear "no" if that's the decision.
That's what the article says
Solid summary tbh. It's all about incentives really.