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.
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