The Art of Saying “No”

The Art of Saying “No”

More often than not, investors say “No” to entrepreneurs. And, entrepreneurs soon become accustomed to hearing “No.” Although “Yeses” can be either slow or quick, fast “Nos” are catching on as best practice in impact investing.

We believe that learning to say “No” – with impactful intentionality - is one of the kindest and most beneficial gestures an early-stage investor can make to a startup social entrepreneur. In our society, we’re conditioned to think that being told “No” – rejection - is always bad; in fact, “Nos” are essential to nailing down an ultimately successful venture relationship.

So, why do investors often make entrepreneurs jump through hoops before they say “No?” Don’t investors do their homework before meeting with entrepreneurs? When investors eventually get around to saying “No,” why don’t they provide any further input or feedback?

The reasons why an investor says “No” are often complex, sometimes private, and occasionally idiosyncratic.  Usually, however, the investor concludes that the opportunity is a mismatch; or the investor has identified a flaw somewhere in the proposition.  Such information is valuable for the entrepreneur and should be shared.

While, hopefully, entrepreneurs do their best to do their homework thoroughly, sometimes they don’t come to the table having “pre-checked the boxes” to make sure that there is alignment between a prospective investor’s objectives and their particular entrepreneurial impact venture. The many reasons why investors may say “No” to entrepreneurs include that the development stage, geographic area of operation, industry sector, growth potential, and/or qualifying factors such as excessive competition or insufficient barriers to entry do not match the investor’s qualification criteria. The list of reasons for potential mismatching goes on and on; the entrepreneur should “prequalify” the investor as much as possible.

We decided to help make it easy for an investor to say “No.” Here is some advice and a few scripts for how to give impactful “Nos.”

3 ways to give an impactful “No”

1. Quickly – If, as an investor, you are not interested in pursuing further conversations with an entrepreneur that may lead to an investment in the company, just say so. The answer can become clear to you before the due diligence process even begins, or the negative outcome may become apparent during a deep dive into the company. The important thing to remember is that everybody’s time is precious and finite – so, don’t waste it by not responding to entrepreneur emails (do you really want to continue getting company updates for the next 2 years?), ghosting an entrepreneur, or dragging out a due diligence process for months. A third of angel investments are made in under 10 hours of due diligence.  Don’t delay the process unnecessarily.

2. Honestly - One complaint we consistently hear from entrepreneurs is that they rarely hear the reasons why investors are not interested in investing. While investors may not want to be extremely candid with an entrepreneur they just met, honestly really is the best policy. Investors aren’t the bad guys or gals, but they hold the power in the investment dynamic. Just be human; and give entrepreneurs the feedback they need to hear, even if they don’t want to hear it. This doesn’t make you, as an investor, a dream crusher; quite the contrary, your input could help set up the next investor/entrepreneur interaction for success. Depending on your relationship, do it via email or in person.

3.Generously - By “generosity” we mean offer or suggest a resource, connection, or tool. Remember, the early stage, entrepreneurs may not have access to the accelerators, mentors, and other resources that you do. Investors who say “No” accompanied by actionable feedback rather than a flat rejection, become respected as thought leaders and mentors. Always check with another Angel or Connector to assure their receptivity before making a direct intro for an entrepreneur. If you need a reminder, PeakChange’s Jim Davidson lays out the process in a simple, clear, and humorous way.

We at Peak Impact Consulting are not afraid or hesitant to say “No” because we follow our three guidelines. Do you need help practicing your impactful “No?” Do you want us to say “No” for you until you’re ready to take this task on yourself? Let us know; we’re already “no-ready.”


Dealing in Deal Flow

Dealing in Deal Flow