How Should VCs Say No, When It’s The Team?

One of the things I continue to struggle with as a VC is the unfortunate fact that I am in the business of saying “no” all the time.

Saying “no” in the context of how you invest your time is one thing – fellow VC blogger Brad Feld did a good blog post on this topic in the context of time management a few weeks ago as did Y-Combinator’s Paul Graham. But I really struggle with saying “no” to entrepreneurs. Entrepreneurs pour their hearts, souls and dreams into their start-up ventures and to summarily dismiss them remains the hardest thing about the job. One of my entrepreneur buddies asks me whenever I see him: “So – did you crush any entrepreneurs’ dreams today?” Very funny. Ha ha.

One of the reasons for this dynamic is that VCs are in the business of trying to see everything (i.e., learn about and meet with all the best deals out there) but do nearly nothing (i.e., invest in only one or two companies a year). My blog post on this topic a year ago was a bit tongue in cheek (VCs and Deal Flow), but only a bit.

My dilemma becomes more acute when I try to explain why I am saying “no”. In particular, how do you say no when the reason for turning down the investment opportunity is the team? It’s easier to say no when you have concerns about the market, the business model or the price. The entrepreneurial team is great, you would enjoy working with them, you think they are money-makers, but there’s something in the general model that prevents you from pulling the trigger. Those are the easy ones.

The hard ones are when you are saying no because of the team. Successful start-ups typically follow Thomas Edison’s genius formula: 10% inspiration (in start-up land, the vision or idea), 90% perspiration (in start-up land, the execution). Whether you like the idea or not is irrelevant if you don’t believe the team has the wherewithal to execute it successfully. Sure, a team can evolve over time and new leaders can be brought in, but very few VCs invest behind teams they don’t believe in.

One curmudgeonly VC I know used to say to entrepreneurs: “I don’t think is an opportunity that suits you.” At Flybridge Capital, we try our best to be direct and honest in providing feedback to entrepreneurs to help them with their ventures and perhaps we should have the courage to give it to people between the eyes. I’m just not sure this blunt feedback would pass the decency and respectfulness test. After all, who am I to project such an unfair judgment based on a 45-60 minute meeting? VCs need to “Blink” and make snap judgements after those 45-60 minutes in order to filter and prioritize how they spend their time, but why be mean about it? So in the end, I often settle for a polite “it’s just not a fit for us”. Is that the right approach? Let me know what you think. What’s the meanest turn down you’ve ever received from a VC?

Jeff is a partner with Boston-based VC firm Flybridge Capital Partners. Read his past peHUB posts, or follow him on Twitter at


  • I’ve been on both sides of the fence with this, a funded entrepreneur and a venture partner for a vc. And in previous careers I’ve had to say no to game developers and book authors. So it’s not a unique problem, because the creators bring a huge amount of passion (we hope) to what they do.

    I don’t think being honest needs to be cruel, although you can’t control the reception of what you say. I would just say, and have, we just don’t think the current team is strong enough or the right mix for us to fund this idea right now. I’ve done that several times this year, for ideas that I have loved, too. If people ask for specifics, I try to make suggestions without being arrogant, because, after all, what do we really know after an hour, beyond our intuitions (which are often right, I think.)

    Usually they are rational or explainable reasons: not experienced enough for the task ahead, not enough business experience, wrong experience, a lack of a good sense of chemistry with the team, and sometimes, a very specific comment. One founder was clearly too micro and scattered (quite the combo) to allow for the emergence of a strong and steady team around him, and I said it straight…I pointed out that if he were unable to attract a management team at least as awesome as he was he would not be able to succeed, and from what I had seen so far, he had not been able to do that. Surprisingly, this person took the comments exceedingly well and set about re-thinking his personal approach. Perhaps it will resurface, he will take a different role and there will be a fundable business.

    Sometimes you’ll come across entrepreneurs where you clearly don’t want to engage too much. But in general I think that a calmly and even kindly explained honest rejection is good all around — for you as the VC to sharpen your communication skills, and for the entrepreneur to learn a little bit more about themselves and what it takes to get funded.

  • If you have difficulty honestly telling an entrepreneur why you are passing, then you need to get a new job. I am an entrepreneur and it can only help me to get honest feedback. If I can’t accept that, then that is my problem and not yours.

    Entrepreneurs often just get false excuses from VCs about why they are passing with explanations like “we don’t have enough bandwidth at this time.” That’s not helpful at all and actually disrespectful. Don’t be a wimp and be honest.

  • It’s not honest or helpful.

    You may also be passing on a good opportunity. If there’s an identifiable hole in the team, then the investment could be contingent on filling/repacing the deficiency. Entrepreneurs sometimes make mistakes by placing friends in senior positions or the position may have grown beyond the skills of the incumbent. For example a good bookkeeper isn’t usually a good CFO and a good sales person running 2 people may not be able to handle 10. A tech CEO may become the CTO. This happens all the time.

    If the opportunity is good, the technology sound, and the rest of the team seems to be right fit, one outlier shouldn’t queer the deal. If the entire team seems wrong, yet they’ve made progress, maybe it’s your radar.

  • It depends on whether you think the team is salvagable. If the entire team is bad, a simple “no thank you” is best.

    If they just need to fill or change 1 key role, tell them. But don’t just say, “you need a new CFO.” Instead tell them that based on what little you have seen you have concerns about whether the current CFO has the skills necessary to make the startup succeed. Then lay out the skills or background that you would consider would make for an ideal CFO for this venture. This gives the team *actionable* feedback.

    Presumably, if they came back to you in 2 months with a better CFO it would be worth 2 minutes of your time to scan his resume and see if perhaps this makes the difference between a pass and a deal.

    Try to be polite and a little humble about the suggestions and if the team gets offended or defensive, well that tells you something valuable too.

  • Having been a venture backed entrepreneur, a VC, and an LP…..

    I think it is important for the GP to understand what the team deficiencies are that are bothersome, and to give some type of appropriate feedback to the company, if at all possible. I know this is easier said than done….and the discomfort may be fuzzy and difficult to exactly specify after a 45 minute pitch.

    However, if the reasons cannot be articulated by the GP….even internally, on Monday morning….then perhaps they are not entirely justified. Some may remember when an Asian CEO caused discomfort. Articulating unspoken prejudices helps with GP team development as well.

  • I think you should be direct, but also precise in your feedback. The entrepreneur could probably benefit from the input and could be an asset to you in the future. I think more VCs should think about their longer term relationship with people that walk into their office. A so-so entrepreneur today could be a great one a few years from now. Or maybe they have a good answer for you today.

    I think its a good thing that you’re honest about the imperfections on the VC end. More entrepreneurs need to understand that YOU understand that a 60 minute meeting will have a high error rate (i.e., a VC could miss a great opportunity), but also you have to move on to the next opportunity.

  • If you are asking a company (and entrepreneurs) to be honest with you about their business,
    market etc. during their pitch, why wouldn’t you be equally honest in your appraisal of it?

    You can cite the reasons for refusing, even to the point of telling a CEO they don’t have the
    demonstrated ability of success in the past. Maybe the CEO will take this criticism and either
    show some incremental successes that prove they have the right stuff or they’ll try to get
    someone else in the position.

    From the company (entrepreneur) prospective: they’ll take the criticism and be constructive or
    they won’t. There are plenty of examples of people with little business background that were
    wildly successful (Bill Gates for instance) and there are equally plenty of examples of people
    with “the correct” business background that were dismal failures.

    Everyone is an adult here, tell them the truth.

  • I’m a former funded entrepreneur who’s seen this movie a couple of times. Unquestionably the most compassionate response is the direct yet respectful approach. Entrepreneurs needs to know if professional investors find flaws in the idea, the team, or both. In some cases it might be the entrepreneur himself.

    If I were the CEO of a team pitching an idea I’d want you to meet with me 1:1 and tell me why you’re rejecting us. If you were interested in the idea but wanted to augment the team tell me that. If you think I’ve got a great idea but I’m not the guy to run it tell me that too. If the entrepreneur can’t handle that feedback them he/she probably isn’t cut out for building and leading a team and managing your OPM anyway.

  • One cannot control how someone else feels. Therefore the nature of the entrepreneur will determine how he/she reacts when told that the reason for not funding the company.

    Similarly, it shouldn’t matter what other people think of you either. If the entrepreneur thinks you are an a-hole because of what you said, when in reality you acted respectfully and honestly, then who cares?

    Frankly if the entrepreneur reacts in such an irrational way, then it just proves the point for not funding the emotionally-ran company in the first place.

  • You should give the entrepreneur honest feedback. If they react poorly, well that validates your intuition.

    As an entrepreneur who has been funded once, and not funded, too, I always want feedback. It is how I will learn, and also how I might correct holes in my team and/or bsuiness model. In my funded company, I saw the CEO who was brought in by an Angel investor run the company into the ground (although he did lead a successful venture round). The Board knew he was a terrible CEO, and a worse leader, however they never told him. He ran the company into chapter 7, and the acquirer kept him to run the company. Now he is running it into the ground a second time, and still nobody is telling him the truth. He is again blaming everyone else.

    Entrepreneurs are much better off hearing the truth upfront. As Harry Truman said, “If you can’t stand the heat, get out of the kitchen.”

  • It’s good to hear you have not become jaded or lost connection with a founders’ passion. My worst experience gets repeated all too often – no real reply at all. The pros I have come to respect get back to me quickly and directly. The next worse is a non-no. “I want to pass it by another one or two of my partners” and then “We want o do some additional research on the space” and then “We may be able to get there” and then… This is almost always a waste of both our times and comes without any learning. Funds that want to invest in my start ups almost always know it from “hello” and move purposefully forward. This was true 20 years ago and still proves true today (last month to be exact).

    Be honest with the team. Tell them exactly where you see their strengths and weaknesses and even whether you believe they have the intestinal fortitude, drive and mettle for start ups. But also be humble and aware that you are not the only and final judge of their abilities. With that information, the team can manage their lives and careers accordingly.

    As an entrepreneur, I have learned that the only bad information is information that I do not have. Tell me.

  • These are great responses – thanks for them! I think the points about “direct but respectful” (Walt Geer’s phrase) and Andrew Ackerman’s “polite and a little humble” are good phrases to guide any VC in their interactions with entrepreneurs. When I was an entrepreneur, the VCs who were able to pull this off were the ones I kept coming back to.

  • The “meanest” response ever from a VC (granted, I have not had a ton) is the lack of ANY response.

  • […] venture capitalist Jeff Bussgang explains why it’s tough to say "no" all of the […]

  • Tell people what would have strengthen their application.

  • Jeff, great post and I can certainly empathize with the challenge of saying no respectfully… especially when the reason is the “team”. It is a hard reality that many entreprenuers, while brilliant and enthusiastic, are not necessarily suited to grow and run a company, nor are they willing to admit that to themselves. This one trait, in my opinion, has killed more deals…. The VCs are in a tricky position because if they recognize upfront, they don’t invest, yet if they recognize it later than it can tank the organization.

    It is equally important for an Entreprenuer to recognize and admit what they don’t do well as it is for what they do do well. If you are honest with the entreprenuer about your assesment, you may be doing them a favor in the long run. Entreprenuers have to understand that it is a partnership…

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