Every entrepreneur wants to hear "yes" during the fundraising process, but I would argue that being too risk-averse and not pushing hard enough, and be unwilling to hear a "no," is what holds back many people from "yes."

I believe people generally hate making decisions, and especially so when they involve commitments and risks. This is true of any buying process, whether a customer has to make a large investment decision on your software or decide whether to give you $5 million. In the case of the investment, they may not only be committing the personal risk of looking bad if things don't go well, but also countless hours of board meetings, financial reviews, and dealing with legal documents across 7 to 10 years or more.

So it should be no surprise that "yes" doesn't come easily. But "no" also doesn't come as easily as most people would like, so entrepreneurs can get stuck with an endless string of "maybes" or non-responses. When somebody has to tell you "no," the potential investor:

  • Feels the discomfort of letting you down; investors are human, after all.
  • Has to come up with a valid reason, because they know if in communicating with founders they can't come up with a reason to say "no," it can generate bad will.
  • Risks missing out on an inflection point: Investors are concerned about saying "no" too early in the process, especially if they can "hang around the rim" and see what happens.
  • Might offend an entrepreneur, leading to reputation risk among other entrepreneurs. Investors fear that saying "no" to you now will offend you and have them tell other entrepreneurs, and/or make it harder to come back to you in the next round. 

For these reasons and more, fundraising often leads to a frustrating sense of never really knowing where you stand, and founders often have no plan for how to push prospects along, typically out of fear that being too pushy could lead to an earlier "no." Maybe this is reverse "hanging around the rim," where you think if you keep your VC process going long enough you'll eventually get to "yes"?

Of course, stringing out the process doesn't lead to good outcomes. I spend a lot of time coaching entrepreneurs through their fundraising processes by doing "pipeline reviews" of all the firms with whom they are speaking. These are similar to the pipeline reviews I used to do with sales reps when I was a CEO. What I'm looking for in the conversation is:

  • Whom at the firm are you meeting with? Do they have authority to invest? Do they have influence? Can they get deals done? Do they understand your space?
  • When was your last contact? How many meetings have you had? What information did they request? When did you last hear from them? What feedback did they give you about the process?
  • What is your next step in the process? It surprises me how few entrepreneurs even know what the next step is. Because entrepreneurs often don't feel comfortable in a sales process (as a fundraising process is) they often don't ask about the approval process at the firm. It is perfectly acceptable (and should be required!) to politely ask about the process.

The net result is that often founders don't really know where they stand, what they would need to do in order to get an investment, who has to decide, what the process to get that decision is, and what are the next steps.

My belief is that founders often don't push hard enough in asking for more meetings, asking where they stand, asking what the next steps are. I counsel people that they might need to hear 20 "nos" to get three or four firms that move closer to a "yes," but those three or four firms might not make progress without the founders taking a bit of a risk.

I have to admit that I learned this from Carly Fiorina. When I was young I did some consulting for the European arm of Lucent. We were working on their go-to-market strategy for Europe, and Carly was group president of the division I was advising (a $19 billion line of business) at Lucent, and she flew out for the final presentations. She stood in front of the sales executives and shouted at them like she was a high school football coach.

She was imploring them to push harder in their sales process. To go "top down" in all of their campaigns. To use advisers or contacts to help them build executive-level relationships. And to be willing to hear "no," as long as it came quickly. That they shouldn't accept a "muddy maybe" where buyers avoid making a decision. She told them they should embrace "no," because it's better to hear it early, so you can focus your resources on places where you had a better chance of getting to "yes."

It was deeply uncomfortable for me because it was a sort of in-your-face, aggressive, "go conquer the world" kind of speech. But honestly, it changed me in positive ways, because the message -- however hard to hear -- resonated. It conveyed urgency, it implored people to respect their own time as much as they respected customers' time, and it asked people to have the courage to face rejection. I have since incorporated this into my own standard (softer) speech to entrepreneurs:

"People are afraid to hear 'no,' so they don't push hard enough. You need to be polite, but if you respect yourself, you've earned the right to ask the awkward questions about where you stand and what comes next. If people tell you 'no' as a result of a polite push, they were going to say 'no' anyway. But often, if they don't say 'no,' you've just got yourself a commitment to re-engage."

I push for commitments in my own job, sometimes beyond my comfort level. I once had a potential LP back in 2010 (when fundraising as a VC was harder for me) tell me that he thought he was a better fit to look at our next fund rather than this one. I had learned this is a standard line every LP uses to have an "easy no" for VCs. He hadn't actually told me "no," so I figured, "what the hell?" I'd give it a bigger shot.

I told him, "Why don't you come visit me in L.A. I'll set up a dinner with six or seven VC firms and a bunch of prominent local entrepreneurs. At the end of it, if we're not a good fit -- you've at least gotten informed about the L.A. market for whenever you do want to invest. What have you got to lose? Besides -- the weather in L.A. is great this time of year!" I then stayed silent. It's hard and awkward to do this because silence demands a response.

He said it sounded like a good idea and committed to coming right then on the phone. Phew. I was relieved. It had no downside. At the very least I would build a better relationship and help other VCs in L.A. get to know an important potential LP. He did come, he enjoyed himself, learned a lot, and we became much closer. What I liked about this approach is that he could "see me in the wild," how I normally am with my peer group, rather than pitching PowerPoint at a conference room table.

Then he went a little bit dark on me. It wasn't surprising -- if he engaged he would have to make up his mind, and I knew he was leaning against saying "yes," but I forced myself to actually hear "no" from him. I asked him for a quick call to give him an update on my progress. I used this opportunity to ask him how the trip went and what he was thinking about L.A. He told me, "I had a great trip. But honestly, we normally invest $15 million in funds, and I don't think I have the time to get the work done in order to make a commitment to your fund. I'll try to get the work done but I doubt we'll have a positive answer in this process. In any event, give me time to do the work."

I knew I was going to get sucked into another six to eight weeks of avoidance, some basic analysis and likely no progress. So I pushed harder, willing to embrace a "no." I told him, "Listen, why don't you just give me $5 million. I don't need the $5 million, it will be among our smallest commitments. But I know that if you invest, you'll take more time to get to know us. If you like us over the next three years, I promise you a $15 million allocation in our next fund, and if you're not happy I promise not to hassle you for another dollar. You literally have nothing to lose. What do you say?"

Yes, this was out of my comfort zone. I was pushing for a "no" but hoping for a "yes." This wasn't the first time I had pushed this hard, and I had certainly heard "no" many times. But this time he told me he'd think about it, and we scheduled a call 48 hours later. And as you imagined, he said, "yes." I couldn't believe it. For us, $5 million was a small check, but it was a victory.

The firm he invested from has now invested more than $30 million with us, but as important, the investor changed jobs and moved to another firm that went on to commit $70 million over a six-year period. He also has gone on to become one of my closer LP advisers. He pushes me hard on issues that have helped me grow.

But I swear to you, if I hadn't been willing to hear "no," I never would have gotten a "yes."

Embrace "no" and don't take it personally. It will unlock your much bigger potential.

"No" sucks, but it is also liberating.