VCs that Ghost
Dealing with investors that drag out the process
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VCs That Ghost 👻
I frequently hear from founders struggling with VCs who are ghosting them or seem to be dragging out the decision-making process:
When this happens to you, here's how to think about it:
Investors are either fast to "no" or extremely slow. The ones who are slow sometimes never actually say "no."
It can be a frustrating experience if you do not properly align your expectations with reality.
We do not live in a world where every investor consistently acts with conviction.
Instead, many will hedge, delay, and otherwise try to avoid definitively passing on an investment opportunity.
Investors ghost or drag out the process for one of two reasons…
They want to "hang around the hoop" — at the moment, the opportunity isn't incredibly compelling enough to reach conviction. But if it gets more exciting (a top-tier firm commits, the startup starts growing rapidly, etc.), they don't want to miss it because they have already passed.
They are bad at closing the loop / their internal firm process causes decisions to get stuck in limbo — they did not intentionally leave you hanging, but they are not good at seeing things through to a conclusion.
How to address ghosting / a drawn-out process
If you push too hard for a decision, you will likely force an investor to pass. You'll also risk looking desperate if you don’t already have at least one term sheet in hand (more about this dynamic in an upcoming TWF post).
Here are a few things you can do about it:
Ask them what their process is like in your first meeting.
“How do you make decisions as a firm? What does your investment process look like?”
What VCs say about their process is sometimes more aspirational than true to reality. Regardless, you'll have a general idea of whether you're progressing.
Show business momentum during the fundraise.
An investor seeing the core customer/user metrics grow each week helps them build conviction — both in their own mind and with other decision-makers at their firm.
See the essay Founders and Momentum and TWF post Weekly Investor Updates.
Get angels to commit early in the fundraise process.
Announce as you add them in your weekly update emails:
"Welcome [notable angels] to the team!"
This shows prospective investors that operators and founders with good judgment and relevant experience are getting involved.
See TWF posts Tranche Fundraising and Check Size Doesn't Matter.
At the end of the day don’t worry about these investors too much. Remember that most investors will pass. Most won’t understand what you’re building (even when your customers do). Just keep going! ⚡️
That’s all for this week — thanks for reading.
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- Julian
Recent Posts:
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Tranche Fundraising - Give early investors a "buy-it-now" price
MFNs - Are they a lousy deal or free money?
Weekly Investor Updates - Keep investors close and yourself on track
Check Size Doesn’t Matter - Forget minimum amounts and optimize for quality people
Raise the round behind you - Avoid a drawn-out process and optimize for the best investors.
Conditional Commitments - Why they aren't commitments and what to do about them.
Handling Inbound From Investors - Avoid distractions and keep potential investors warm.
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Customers understand before investors do - And some investors will never understand
The Benefits and Downsides of Responsiveness - Where it can help and where it can backfire.
Avoiding Gossip - Nimbly navigate an awkward scenario.
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