TBC: Answering Your Questions About Getting Passed On

By Jason Yeh
June 20, 2024
Listen on Apple Podcasts

TBC: Answering Your Questions About Getting Passed On

Welcome back to The Backchannel! In this episode, we're trying out a new format where we dive into your burning questions about how founders should navigate investor passes.

Welcome back to The Backchannel! In this episode, we're trying out a new format where we dive into your burning questions about how founders should navigate investor passes. Join Jason as he addresses the following questions:

- Should you send a follow-up email after a pass? How soon is too soon to follow up after an informal meeting?
- Is it appropriate to ask for feedback on why an investor passed?
- How soon do I follow up with an investor who seemed interested?

If you enjoy this format, let us know what other topics you'd like us to cover!

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Episode Transcript


Hey there. Welcome to the back channel. In today's episode, we're going to try a new format. We've had a bunch of questions submitted about a very specific topic, and I want to go through each of them in each of the questions and share my thoughts, my insights, how I would respond. And hopefully that will give you guys a little bit more perspective on some of these really important topics.

If this is a format that you end up enjoying. Please let us know. Leave us a comment. Send us, send us an email, maybe a topic that you want me to cover in this way. Uh, and we'll try to get to it in the future. So we're going to get it to it really it's about how founders should be dealing with investors that pass. And the variations of way people pass and how you might [00:01:00] need to communicate with them afterwards. I think founders are often confused around what they should do, what they're allowed to do, what they should avoid doing.

And so maybe we can talk a little bit about the things that I think about when it comes to passes as an investor, and then passes that you're receiving as a founder. So the first question is, should you send a follow-up email to investors who passed? What do you include in that email? So the first thing I want to share with people is that. You should realize that it's not easy for an investor to pass.

First of all, no one likes really making people feel bad and passing is rejecting people, and that doesn't feel good. You'll often hear. Investors say like the worst part of my job is that I have to keep rejecting people and telling people, no, even though their businesses might not be bad businesses, they just might not be fits for me.

So once you understand that you can kind of get into a mind speed, mind space of. What's appropriate in terms of follow-up for sure. You should not be taking these passes personally, [00:02:00] and then reacting. Thus, you should be thinking about this as something that they have to do and realizing that. You need to preserve a future relationship because a pass now doesn't mean a closed door forever. These are people that might invest later on even potentially in the same round. Sometimes these investors have the ability to invest in future rounds. And then one other thing to add to this is even if they don't invest. There's a good chance that they will be asked about you.

And if they have a positive. Uh, feeling about you, even though they didn't invest in your business, that positivity. As translated to another investor who might be asking what'd you think about Jason? When you met with him, if they're able to say, you know, I couldn't get there with the business, but I thought he was awesome. that'll go a long way, as opposed to you potentially leaving a sour taste in their mouth with a negative [00:03:00] follow-up. That, that conversation and that, um, reference check on you could go in a very different direction.

So what can you do? I think you should send a polite and short, thank you. Email. You might be upset a little bit, in which case maybe it's a. bit of a shorter and more abrupt email, but if you have your wits about you. And you're a little bit more comfortable send a polite and short email. Don't try to change their mind in the email. You should let your future success and updates do that in that email, nothing is going to change their mind.

So just say, thank you. I appreciate you spending time with us. we appreciate the opportunity. And look, we should stay in touch because I'm sure we're going to make some progress and we enjoyed meeting you. Something like that is totally simple. appropriate and can lead to future conversations, which is always valuable.

The next question I have here is I had a meeting that I thought was going really well, but it was pretty informal. And there wasn't a real [00:04:00] yes or no at the end. They said they were interested and they'd follow up. I haven't heard back yet. How soon do I follow up?

[00:05:00] So the first thing around this is everything is always sending signals to investors.

Trying to get a sense for who this founder is, what this opportunity is like. So. We always want to avoid sounding desperate. Um, you, you really don't want to appear too eager. You don't want to, you don't want to appear, like there's no other opportunity that you have. And so for me, I think a few days to a week is a comfortable period of time to wait before reaching out. Um, obviously there's variations to this.

If things are actually moving quickly and you want to push someone along because there is real demand there, then reach out, reach out confidently and [00:06:00] say, Hey, just reaching out quickly because things are moving along. I just wanted to make sure I understand. Um, you know where you're at? So something like, Hey, great talking, wanting to make sure, uh, my next meetings were all set up and happening and want to stay up on to on top of this. Let me know if I can answer any questions is a relatively good email again. Write it in your voice, make sure that you think about it from the standpoint of, does this sound like I'm being desperate?

Does it sound like I'm being confident? If you can answer those questions in a positive way. Um, I think you can't go wrong. So. One trick that I have around any type of communication. When I'm thinking about a founder, when I'm a founder, when I'm trying to message a VC and show confidence, I'm always thinking. WW PCD, which is what would Patrick Collison doom.

I use Patrick Collison as my stand-in, um, very successful founder who would always get money from investors, especially if you were doing his [00:07:00] next FinTech startup. So if you were this ultra confident ultra credible founder, And you wanted an answer from a, from a VC because you liked them. What will you do?

You, you would probably not like rush you. Wouldn't be like. Uh, over the eager, just because like you have other things to do. But when you, when you sent your email, when you wrote your email, it would be short, it would be confident. And that's the kind of mindset and tone that I want you to take whenever communicating in these situations.

So WWP, CD, good little hack. Finally. Question three. is it appropriate to ask for feedback on why the investor past. So. First off. You need to understand, um, how rare it is to get accurate and detailed feedback. The reason is because I think that most passes. Aren't really anchored in very specific rational. [00:08:00] Um, discrete. Um, decision-making. Yeah, it isn't because like you were 2% off of this line that we needed you to hit.

If you had been 2% higher, we would have done the deal. But because you were 2% lower, we didn't do the deal. It's never like that. It's more so a bunch of different things in the easiest description is that. They didn't get excited. They weren't excited enough rather than very specific fixes fixable issues.

So if you try to push an investor to give you tangible, actionable items, A lot of times, they'll just feel like they need to make stuff up. That might be it overly cynical. Uh, belief and, and, um, perception of what, what happens in these situations. But I think more or less. Uh, more often than not, it's accurate. So because of that, you got to understand when to ask for feedback. Kind of only want to ask if there's a good enough relationship where you feel like they will be honest with you and they can tell you the big [00:09:00] pain points or the things that really turn them off. Otherwise, you're just kind of setting up a situation where someone is going to feel awkward.

Someone's going to have to burn cycles to create a reason why they past. And then you're going to get feedback that actually isn't valuable for you. So if you're going to ask, keep the request simple. Non-intrusive. Maybe say something like, by the way, always trying to get better. You might not have anything.

Maybe it's just wasn't for you. But if there is anything that came up, honest, quick, small pieces of feedback that you're willing to share with me, I'd love to hear it. Otherwise, thanks again for finding the time. Enjoyed the opportunity to pitch. And then move on.

So overall, I think the big things I want you guys to take away is remember. That passing is not easy for VCs. It's not a fun thing to do. So don't take things personally. Remember that. When we [00:10:00] are communicating with VCs in any case, but certainly as we are getting passed on, we want to avoid sounding desperate.

If we think we're going to move the needle for sometime in the future. Uh, we don't want to come off desperate. We don't want to feel too eager as we're trying to figure out why they're not talking to us. And then lastly, remember that passes are really wrapped up in a lap and a lack of excitement. And there's no, there's not as much rational reason why they can point to passing on some deals in doing other deals.

And so pushing them on giving some specific feedback can oftentimes be a fool's errand. Oftentimes. Lead to wasted cycles on both sides. And sometimes hurt feelings on your end. So I hope this was helpful. Thinking about. Uh, addressing the different ways investors explicitly pass on you or quietly pass on you. If you liked this format again, let us know.

Hopefully this was an interesting way for me to share my insights. And we'll see you on the [00:11:00] next episode of the back channel.

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