No check doesn’t mean “no”

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Picture this scenario and let me know if it sounds familiar. You’ve met with a potential investor about your new startup opportunity. During the meeting the investor told you that the business plan “sounded interesting” and they “really liked the opportunity”. They enthusiastically shook your hand on your way out the door and you left feeling elated.

Days later you waited patiently by the phone for a follow-up call, but the phone didn’t ring. You checked your e-mail, your instant messenger, and your text messages – nothing. The days soon turned into weeks and somehow you never heard a peep from those highly interested investors.

What went wrong?

The short answer is that nothing went wrong – that’s the way investors work. You see, investors speak a very different language that most entrepreneurs have a hard time translating. They tell entrepreneurs that they are excited about a business opportunity which entrepreneurs of course take to mean they are ready to invest.

What they really mean is that they have no interest in investing in your company, but they want to leave the relationship on a positive note in case they ever change their mind. It’s like going on a date in high school with someone and not officially telling them you’re not interested – just in case one day they turn into Brad Pitt or Angelina Jolie.

Why investors can’t say “no” directly

The truth is that investors can’t afford to say “no” to any opportunity in a direct manner. Most opportunities that pass through their door might sound terrible today, but tomorrow they could be the next Facebook or Google. Smart investors know that there’s no value in ruining a relationship with an entrepreneur just because the deal doesn’t make sense today.

This is of course completely maddening to the entrepreneur. In life we’re used to hearing “no” when someone means “no”. To make matters worse, entrepreneurs are so excited to get their deals funded that they often perceive anything that isn’t a “heck no” to mean “yes.”

The art of the “long no”

Investors have made what I call the “long no” into an art form. They’ve found dozens of ways to avoid saying “no” while meaning “no way”. The result is a long, roundabout way to tell you “no” without actually saying it. To help you understand this process a little bit more, let me give you some examples of what the “long no” sounds like.

The “long no” often involves some iteration of the phrase “interesting.” You’ll hear something like “sounds interesting” or “this could be real interesting” which of course sounds like a positive response. In reality, it’s the equivalent of describing your not-so-attractive date as having “a really good personality.” You don’t want to offend them, but you don’t want to tell them what you really think either.

Although it may sound counter-intuitive, you don’t want to be “interesting.” You want to be invested in, which means you need to get as quickly past “sounds interesting” as possible and get right on to “we really want to get this deal done today.”

You’ll also get a fair amount of “let us think about it” or “let us get back to you.” These are also telltale signs of the “long no”. Investors run across very few deals that are exciting enough to invest in, so you can imagine the ones that they like get their immediate attention. They didn’t forget to call you back – they are just ignoring you.

Entrepreneurs often think of pitch meetings with investors they way they think about sales meetings with customers. Sales meetings usually involve follow-ups with an eventual close after the decision-maker has had time to decide.

Investors on the other hand are more likely to have made their decision before you even walk out of the room, whether they express it or not. Therefore you can imagine if they are not following back up with you right away, your deal probably isn’t going to get done.

The answer is no until the check clears

Instead of driving yourself crazy listening to investor double-speak and corporate euphemisms, perhaps you should try this piece of advice – assume the answer is “no” until the investor’s check clears.

That may sound overly pessimistic but you’ll probably find after spending enough time with investors that’s it’s a far more pragmatic approach. It’s typical for an entrepreneur to spend 6 – 9 months trying to raise capital (if they raise any at all) and most of this time is spent being misled by investor reactions.

Assume everything an investor says that doesn’t involve writing a check is as good as hearing the word “no”. Even if you are fortunate enough to get into the nitty gritty of a deal where you begin to talk through specific deal terms don’t assume the answer is “yes”. Assume the answer is absolutely “no” until the investor has written the check and handed it to you. And then assume its “no” until it clears.

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