Emails that turn down some investment opportunities are tricky. Each of these emails is one that needs a lot of time in order to craft and communicate well the positives and negatives so they’re well balanced, clear and articulate.
When I do this I want to get across things along the lines of:
Encouragement but don’t flog a dead horse – no one knows what the future will hold and any decision not to invest is a snapshot based on the information available and the investor’s opinion right now. Founders will get more rejections than offers so in no way should they take a rejection as a sign that the business will not work. If it seems like a dead horse, however, it should be said no matter how tough it is to write and read.
In the words of Brendan Hodgson, “Make a pest of yourself”. If an investor has rejected the chance to invest then they can still be useful – use them as a source of advice and feedback on why the proposition didn’t make the cut. (Founders should not, in my view, ask for introductions to other investors if they’ve been rejected – seems a bit weird that I should pass on prospects I’ve passed on to other investors (unless there’s a specific fit for them that wasn’t there for me)).
Teach me – if a rejected company/founder goes on to make a billion then I want to know about it and learn. Another reason to keep in touch.
“No, not now”. The ‘not now’ is a genuine, not now. If the founders can execute and turn around the risks that are too much right now then investing in a later round is an option. Sure, the valuation will likely go up but the risk will be lower.
The “No” part is a no though. It doesn’t help anyone if the founders think that after the rejections email they can persuade a change of mind. Words won’t change the answer – execution over the next few weeks and months will (see 4, above).
Trust – giving some bullshit fluffy excuse isn’t helpful. Genuine, precise and focused reasons to exactly share the reasons(s) for the rejection are helpful for all concerned – a long list of reasons is pointless if it was only one major one that made the difference. Again, it’s not a criticism but if they’re aware of the investors concerns this can help the founders move forward.
The risk - explaining what risks and issues there are and provide guidance towards a path the company can derisk. This could be getting the major customer, adding to the (advisory) team or cutting costs.
To talk about getting involved with DMG please email Matthew on firstname.lastname@example.org