Everyone wants investment from venture capitalists.
It’s the validation that catapults you onto the cover of Forbes. Your seat at the pantheon of famed tech bros like Adam Neumann, Elizabeth Holmes, and Sam Bankman-Fried.
VCs can be a curious bunch, however. They have a special secret language — a dialect that’s borderline incomprehensible to the uninitiated.
For instance, much like the Inuit people, who have many words for snow, were you aware that venture capitalists have more than 400 words for “no”?
Language betrays purpose. In Orwell’s 1984, Newspeak was created to narrow the range of thought and, ultimately, make dissidence impossible. In the same vein, VCspeak has evolved to serve one key tenet:
“Never say no to a founder, just in case.”
VCs have no incentive to sour their relationship with you. What if you become the next Zuck and remember the deal associate who let you down gently?
You’ll never hear the true reason for turning you down this time. For a pre-seed or seed round, this is either:
They don’t believe in the management team.
They don’t believe in the market opportunity.
Today, I’m telling the story of my multitude of VC rejections. I’ll impart my hard-earned knowledge of VCspeak and explain what VCs are saying when, really, they just mean “no”. Finally, I’ll close with my top 10 survival tips for when you’re out fundraising.
Fixr — The side hustle from Hell
My first real startup, Fixr — think Uber for car repairs — was a mess from the start. When I joined up as ‘CTO’, there were endemic power struggles between the existing founders and a chronic case of “if we build one more feature, then the users will flock to us”.
Through a Herculean effort of LinkedIn networking, we set up some calls with very junior VCs. None were brave enough to rip off the poisoned shirt we had woven for ourselves:
“Talk to us again when you have traction.”
In our first-time founder naïveté, we took this to heart. Our startup lived or died on whether we had traction.
Screw talking to users. Screw validation. We needed to get our product out of stealth mode and into the open. First, we’d take the market by storm. Then, we’d hoover up those promised VC dollars.
For our two-sided marketplace startup, this meant Android and iOS apps for customers, and another pair of apps for mechanics. 6 months later, we released our fully-fledged MVP to a deafening silence from customers, mechanics, and investors.
The junior VCs didn’t speak to us again.
Carbn — Phase I (Bootstrapping)
My second startup fared far better.
Carbn was an app to help people develop green habits. It was a marked improvement — we were only building the iOS app and barrelled from customer validation to MVP in our first 4 months!
From here, we had a few months of bootstrapping left in us and were desperate for our first capital injection. Unfortunately, we heard another classic refrain from the venture capitalists:
“We think you’re too early for us, speak to us when you raise your next round.”
Admittedly, that was fair when we had zero revenue and low-thousands of users. We weren’t fazed — we approached various angel syndicates, accelerators and exhausted all the goodwill we could muster via our networks.
Through the complementary magic of a strong early app store rating and my socially hypercompetent cofounder, we landed a cool £200k in angel funding.
Carbn — Phase II (Pre-seed)
With a business bank account brimming with angel funding, we went on a hiring spree and maintained a consistent 10% week-on-week DAU growth — nothing to sniff at. But was it enough?
We were wrestling with a critical strategic issue: Should we remain a B2C consumer habits app or position ourselves in the B2B space as a climate-conscious employee perk? Having dipped our toes into both approaches, we’d hit our pre-seed growth targets and began to reach out to VCs for our next round.
We encountered the customary mix of ghosting, half-arsed lukewarm interest and genuine leads. This time, as well as the classic “come to us with more traction” and “talk to us in your next round,” we had some bigger fish biting for a second meeting.
We’d been speaking with a partner at a top-tier Silicon Valley VC. He was enthusiastic about Carbn, and asked us to present at their Monday Partner Meeting. Our presentation and subsequent conversation lasted over 2 hours. They told us they saw us becoming the climate B2C play. We felt it went well.
February 2022.
I was suffering the worst norovirus of my life. I’d been playing Elden Ring for 10 hours straight. I couldn’t tell whether I was dying more in-game or in real life.
We got the call from the VC.
“We like you, we want to invest, you should start hiring now.”