It’s fast approaching a year since I joined Blackbird. I’ve had the opportunity to pause and reflect on how much I’ve learned about investing and its corollary, fundraising, since I joined. Particularly from the viewpoint of the entrepreneur, all my preconceptions were mostly wrong.

The process resembles something more like romance or dating than I thought. So how can you read the signs? How can you avoid feeling like you’re 13 again, not realising when someone is not really that into you, or worse, not realise when they are and miss your opportunity?

Falling in love

Here is what a process looks like when an investor has fallen in love. If you’ve ever been in love, you’ll recognise this pattern:

  • you have a meeting with a partner that goes way overtime — like an extra half an hour, maybe an extra hour.
  • the investor talks way more than you do. They’re finishing your sentences. They are making suggestions. There are some jokes. They introduce you to people who can help you — potential hires, potential customers, people who could help you, other investors who they think might be interested in investing also. In other words, they are already invested in their own minds.
  • They say they’ll introduce you to the rest of the team, and they do that straight away. Maybe you’re in a partner meeting the very next day, or at least within the next week.
  • At the partner meeting, it feels like a natural continuation of your first meeting. Everyone is friendly and interested. Maybe there are some more hardball questions, but on a whole, there is an upbeat energy. Your champion at the firm should be drawing things out that were covered in your first meeting that perhaps aren’t emerging in this discussion. Be sure to take note in that first meeting as to what they asked questions about and what seemed to get them really interested, so that you can weave it into the flow of conversation in the partner meeting.
  • They outline what the next steps and process are, and they keep you updated on where they are at as time passes.

You will never get a straight ‘No’

Investors rarely say ‘No, I don’t want to invest’ directly. The reason is that investors like to keep all their options open. This is bench theory at work. Some new information could emerge that changes how they feel. After all, when an investor meets a company, they are usually just a dot, taken at a point in time. It takes the passing of time to see the lines between the dots.

Not saying ‘No’ straight away wastes the time, energy and focus of the entrepreneur. Fundraising is a time-consuming process and takes the founder away from the business, so to continue that distraction when you have no intention of investing is self-serving and unfair. But, investors are human too. It is uncomfortable to say no to a founder who needs investment. The closer the investor is to ‘Yes’, the harder it is to say. But anything that is not a ‘Yes’ is a no and it helps no-one to be unclear about that.

We try hard at Blackbird to be honest and direct with feedback as we all know what it is like to fundraise. It might mean we pass too early on things from time to time. However, the greater evil is wasting the precious time of a founder who is trying to run a competitive fundraising process while still growing their company. That said, on a personal level, it is really hard and is something that I, in particular, want to get better at.

In fundraising as in love, we should be more direct about our intentions. And everyone should be mature enough to understand that an investment decision is an arbitrary one made at a point in time with imperfect levels of information, and that decision must be binary, with all of the potential flaws that entails.

Reading between the lines

So, what does ‘not yes’ look like?

  • They don’t get back to you quickly;
  • They give reasons for why they won’t invest like ‘you’re too early’ when you know they have invested in companies at that stage before;
  • They don’t introduce you to other possible investors, customers, hires and so on.
  • They ask you for ever more things without giving you a term sheet first. A deck, a budget and maybe your dashboard/metrics are reasonable. 3+ separate requests is a red flag.
  • They don’t log into your product and play around. They don’t ask any questions or make any suggestions about the product.
  • They don’t backchannel and ask others about you.

Beware these signals. If you think they are not interested — don’t let it drag out. Focus on your warmer leads.

It goes without saying that you cannot convince someone to fall in love with your startup. Love at first sight happens when the investor comes with a prepared mind, knows what they are looking for in the world and recognises it instantly when they see you. So, just because you get a ‘No’ from a particular investor, it does not mean you are unloveable. It just means that you are not that investor’s type. There are plenty more fish in the sea.

When it’s right, you will know it. It should feel like you’ve just found a bunch of smart, interested and involved people that you can throw ideas around with at ease. You should feel like you can learn from them; that you can have robust intellectual debate with them. You should have moments the next day, the day after, where you wish you could pick up the phone to run ideas by them. In time, you should be able to imagine enjoying going for a few beers with them. But all that, later.

I hope this has been useful!