VCs that dont like your idea are good for you.

Contrary to common belief, VC’s that tell you that your idea sucks is a good thing. In fact, its the 2nd best outcome you could hope for.  Best would be “holy shit, this is awesome – where do we wire the money to?”, but lets get back to reality – “we don’t like it because _____” is actually a great response.  The worst response is a nice smile and a “we’ll be in touch”.

Here’s why an objection from a VC is good:

For one thing, they are telling you what they think is wrong. You may disagree, and you may even be right, but it does not matter. There is some form of a discussion taking place and this can lead to you changing their mind, or to you being better prepared for your next meeting with a different VC. The objections will always be there whether you like it or not. Its just that some will never be told to you to your face. The ones that are telling you what their objection is are doing you an immense favor. They are helping you. In fact, they know that you don’t want to hear it, but they are telling you their view because:

  1. They are interested and are just drilling you to see how you handle it (yes, this does happen)
  2. They are not interested, but they think enough of you to speak their mind freely, at the risk of looking like mean, arrogant people.
  3. They are not interested, and think even more of you. They know that you are mature enough to realize that they are giving you gold.
  4. They are mean and arrogant.

Reality is that 90% of the time its 1, 2, or 3 (mostly 2 & 3, but thats just the way it goes). 4 happens, but its not common. Why would anyone mean or arrogant bother giving you their time and view point ?

The VCs that smile nicely at you are doing you no favors at all. They don’t want to bother discussing it, and those are the ones that will usually never call back.

For my previous company I’ve raised several millions from VC’s. Many objections came up and  we used them to our advantage.  Here’s what I recommend:

  • Before beginning your fundraising, make a list of objections that might come up, and prepare an answer for it. Be ready. For the top 5 objections, prepare slides that have the answers on them.
  • Dont present these slides, but if the question comes up during your presentation then say: “Excellent, glad you brought that up. I have a slide that addresses this, and we’ll get to it in a bit”. At the end of your presentation, just before finishing, jump to the slide that has this objection on it (you can do this for several objections at a time).
  • Alternatively (depending on your style): handle the objection verbally right when its asked, and finish up by saying “I even have a slide that elaborates on this, and I’d love to talk about it in detail at the end”.  I usually did this.
  • After every meeting write down the new questions that came up, and consider which should be added to your objection list.
  • For an objection that comes up often, handle it IN the presentation even if its not asked. This is for those potential investors that might not ask.  But be sure to build the answer into a slide in a way so it does NOT look like you answering a question, or else you might come off as being defensive (I really should write a post on how to do this… its a whole pack-of-bananas-topic all on its own).
  • Make a list of top 5 risks and present this as part of your flow. These are the top risks that YOU believe that exist. Present them and openly discuss your viewpoint. It will show that 1. you are realistic  2. mature  and the best part is that if they agree with these being key risks then you will come off as 3. smart. Yay.  Follow up meeting, here we come.
  • p.s. if you think that you are scaring them off by showing the risks, then you’re being over optimistic. They will look for the risks anyway, better you tell it to them straight.

VCs that give you objections are being good to you. They are helping you pave your way to your next meeting either with them or with a different VC. And they are not being arrogant, they are speaking their mind as ex-founders themselves. You should already know by now that founders are strong minded and opinionated.. just look in the mirror. Then look to your left. See that VC dude there? he was a founder too.

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