The Art of the Pass



As venture investors, we see hundreds of deals each year. Even the most active firms invest in less than 20 (we’re at about one/month pace for the last two years), so you can do the math on the number of “no’s” that have to go out. Here are some insights and opinions on how to deliver (and extract) value in a rejection.

Venture is a people business. So treat people well.

We all (should) remember the Golden Rule: “Do unto others as you would have them do unto you.” Many of us were at one point founders. Putting ourselves in others’ shoes will help us do the right thing. Remember, your reputation is everything, and founders talk to other investors and each other constantly. Use this to your advantage.

A rejection is better than silence.

In my experience on both ends, investors are afraid to outright reject people for two reasons:

1) They don’t want to lose the opportunity to ‘change their mind’ and invest at a later time

2) As humans, they tend to avoid conflict

Let me rebut each one of those:

1) If you follow the themes in this post, you will often strengthen your relationship with said founder

2) Silence actually creates more conflict. A rejection at least provides clarity, which is valuable in and of itself to a founder, who has limited bandwidth to manage investors, follow-up, etc.

You’ll also feel better about yourself. It’s called closure.

The ‘phase-out’ is just as bad, if not worse.

I was a repeat offender of this during my dating days. You all know what I’m talking about — you already know that you’re going to pass, but instead of just saying it, you kick the can down the road, delaying phone calls and meetings, providing vague responses and timelines and waiting for the other person to reach out just to reschedule again…until they finally get the hint, or lose interest themself.

Don’t do it. It’s not fair to the entrepreneur, and it’s just flat-out exhausting to pull off properly.

Provide real feedback

This goes back to investors’ fears of creating conflict and losing future opportunities. But I’m amazed at investor responses that either provide no reasoning/guidance, or are just complete bullshit. Some examples:

“It’s just not the right fit for us”

“It’s too early”

“I liked it, but just couldn’t get the others on board”

“We need to see more traction”

This is selfish, and founders deserve better. It also can come back to hurt you later on.

  • Real feedback will, you know, actually help the entrepreneur. Isn’t that what we are here for?
  • There isn’t a much better feeling than when a founder who you passed on still thinks enough of you to introduce you to new deals.
  • Expressing specific analysis to founders helps investors do their job better.

So next time, be honest. Tell him/her that you have real doubts about the market size the way they are calculating, or that the team is not experienced enough to tackle this problem, or that because of your experience in _____, you struggle that X will pay Y for Z. Just think their idea is stupid? Tell them! It will also give them an opportunity to come back to you in three, six, or even 12 months, knowing exactly what hurdles they needed to overcome.

Get to the Point

First, tell them you are passing, then go on to say whatever else it is you are going to say. Please do not heap praise on them for two paragraphs, just to soften them up for a rejection. It’s just cruel.

Everyone Deserves One

Again, clarity and any feedback are better than no response. So, we do our best to respond to every direct inquiry we get where at least some effort was made. I’m not counting copy/paste jobs, or when we are obvious BCC w/100 investors. But, if you did your research, found a way to get in touch and mentioned why you are a good fit, I will at least respond with candid feedback.

My Template

No, it’s not an actual template. But there are some common themes.

Hi (founder),

            I’ve enjoyed getting to know you, and learning about (company). After careful consideration and analysis, we have decided to pass on the    current investment opportunity. There was a lot we liked about the business, specifically ________________ and _______________, but we couldn’t get comfortable enough with the following:

  • Two or three bullet points on specific concerns, weaknesses, or assumptions that are yet to be tested/proven

            I’m happy to jump on a quick call and provide more clarity around our reasoning, if you’d find that valuable. I’m also willing to revisit in the future — feel free to update me with your progress. If there is anything I can do that’s helpful, don’t hesitate to ask.

            Rooting for you to prove me wrong!


I’d love to hear from other investors and founders. What do you find valuable in giving or receiving a ‘pass?’


Reprinted by permission.

Image Credit: CC by Jenn Jolley


About the author: David Goldberg

David Goldberg is an entrepreneur-turned-investor. He co-founded and built FreshNeck.com in 2012, exiting in 2014. After consulting for early-stage startups on marketing and growth hacking, he joined Corigin as Director of Venture Capital, where he is tasked with deal sourcing, investment analysis, and supporting portfolio companies. He blogs at www.VCramblings.com.

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