Investors Should Respect Fundraising Founders’ Time

I spent the first three years of my career on the investor side, but having now been able to support fundraising efforts on the startup side has given me a lot of perspective on what is important especially during early investment discussions. This short post summarizes my top 6 learnings for investors and on “investor etiquette” in fundraising discussions.

1. Give a clear timeline

Most investors have regular deal flow meetings to discuss the startups that they’ve been introduced to over the past week(s). Make it a habit to tell the startup when the next meeting is in which you will be able to discuss the deal and when they can expect to hear back from you. It’s fine if you don’t have the capacity to talk about it in the next deal flow meeting, but only in the one after that. Knowing your timeline means the startup can structure the process accordingly.

2. Know your limits (timing is everything)

If you’re currently involved in several follow-on rounds of and/or exit discussions for your portfolio companies, you have at least one company that you really want to invest in and your holiday starts in three weeks, you will most likely not have the capacity to start a full-fledged due diligence for a new deal. If you really like the deal, pass it on to someone in your fund who has time, shift some of your other projects or let the startup know that you will need some more time than usual (although this might mean you will lose the deal). It’s only fair to the startup, you will gain their respect and it will make your life so much easier because you don’t have a founder constantly asking about your progress. Like in any other area of life, sometimes, the timing just isn’t right.

3. Répondez s’il vous plait

Without doubt the most important takeaway for me: if something comes up and you won’t be able to provide feedback within the given timeframe, give a quick heads-up. There is nothing worse for a founder in fundraising mode than waiting for investors to respond. It literally only takes a minute to write a quick note that you’re too busy right now but will come back soon.

This holds true especially if you’ve decided not to invest — it helps the founder to focus his/her efforts, and sometimes, every day matters. And if you weren’t able to communicate the rejection within one day of the decision, do it whenever you can make the time (even if it’s three weeks later). There is nothing worse than ghosting a startup. If this seems like a ridiculous tip: I have already experienced it several times that investors simply stopped replying without giving any feedback, even after one or two follow-up emails from the startup side. While already not a great behavior in a private setting, this should especially not happen in a professional setting.

4. More data will not change your mind

If you’re not convinced by the deal package, asking more questions probably won’t get you there, and it only wastes the startup’s time. I’ve had investors asking to prepare a bunch of questions, only to reject without taking into account any of the answers. Eric Stromberg made an amazing graph on the notion that the more data an investor requests, the less likely he/she is to invest — from personal experience, I can only support this statement. You might have doubts on a specific topic which can be clarified with more questions and/or discussions, but if you’re simply not convinced, no amount of data will change your mind.

5. Be straight-forward

If you’re simply not convinced and maybe can’t even pinpoint the exact reason, or if you simply didn’t have the time to do a proper due diligence, don’t beat around the bush and just communicate exactly that. If you give random reasons, founders might believe they can still convince you. I’ve seen investors rejecting based on the fact that the ticket size is out of their usual range, although their website (and their investments) clearly show that it would have been a perfect fit. Investing, especially in the early stages, is not only about data but also about the people involved, and sometimes it just doesn’t work out — no hard feelings.

6. Reject efficiently

Form really follows function for founders in fundraising mode. Just make sure that the rejection is quick and straight-forward, and the best medium for this is email. It doesn’t have to be a 5-page hand-written letter; be concise and list the 1–3 topics that made you reject. And if you really liked something about the business, you can tell the founder in 2–3 sentences why you were considering the investment in first place (this is nice but optional). Many investors think it’s important to schedule a call to reject personally— but this makes founders not only lose more time, it usually turns out to be a rather awkward conversation for both sides. A nice touch is to offer in your rejection email to hop on a quick call to elaborate your reasons, which the founder can accept — or simply go on with his/her fundraising process.

I’m hoping at least one investor will read this blog post and acknowledge how important a founder’s time is. And for founders: understand that the discussions you have with an investor during the investment process are a sign of how your founder-investor relationship will turn out to be in the future (and read this blog post on how to choose an investor).

Passionate about understanding things and changing them for the better. Here: writing about my experiences in the European VC/start-up world