No. No. No. No. No. No. No. No. No. No. No. No. No. No. No. No. No. No. No. No. No. No. No. No. No. No. No. No. No. No. No. No. No. No. No. No. No. No. No. No. No. No. No. No. No. No. No. No. No. No. (3,750 to go.)
Social Starts is one of the most active early stage venture funds in the nation, as measured by number of checks written according to CB Insights. We said yes over 35 times last year. Which means we said no, in one form or another, over 3800 times.
And for most of us at Social Starts, our nature makes it very hard to say no. We’re positive people; we love entrepreneurs and ideas and the excitement that surrounds the startup ecosystem. We want to say yes. We spend a lot of time trying to figure out how to say yes.
But overwhelmingly, we say no.
We say no for many reasons, but these are our main four:
- We don’t think the CEO will be a successful entrepreneur running this business. This is a tough one to quantify, as most of the CEOs we meet are smart, driven individuals with great confidence in their ability and an unfailing belief that they are going to win. If that weren’t true, they wouldn’t be dealing with the pain and suffering that is part of the job. As a team, we spend a lot of time trying to analyze the CEO’s ability to drive through the inevitable roadblocks that occur.
- There isn’t a CTO (we always say no when this is the case). An in-house CTO is a pre-requisite for an investment from us. It might be the CEO in that role for now, or he or she might have a different title. But we have to have an in-house person owning the code. It’s critical to stave off two of the biggest threats to success: a technological breakthrough from a competitor or a massive failure of your own code.
- We don’t think the business is going to be big enough. This is pretty self-explanatory. We want to be able to envision the CEO ringing the opening bell. If we can’t, then it’s unlikely we’ll invest.
- We don’t know the space well enough to be helpful. One of the reasons Social Starts is successful is our ability to help companies get to their next round of financing. This can take on many different forms, but we’re starting with one hand behind our back if we can't provide expertise in the space the company is attacking.
When we do say no, we’re as transparent as we can be. A few notes on how to respond to a "no":
- When we say we want to be kept informed, we mean it. If you have a regular update list, add us to it. If you reach a major milestone, let us know. It’s amazing to us how many companies take a no and never follow up afterward to tell us how they’re doing. There is a possibility that we will change our no into a yes in the next funding round after you have proven your success.
- It’s not a good idea to tell us we’re going to rue the day we passed. We’re often helpful to companies we say no to in other ways besides investing. An immature reaction both reinforces our decision and also eliminates the possibility that we’ll ever invest in the future.
- Nos are an important part of the process to success as a startup. Take the feedback, use it to improve your pitch, your company, and your outlook, and definitely use it for motivation to succeed, not give up.