Sorry, You Can't Sneak in the Side Door
One of the more common misconceptions founders have is that after being rejected by a VC, it’s possible to get a different outcome by talking to someone else at the firm. That it’s possible to find a “side door” into the VC.
I see this play out quite frequently:
Three weeks ago, I shared the “Pitch Me!” button on my personal blog. 10% of the submissions were from founders who had already pitched someone else at Panache.
Two weeks ago, a trusted friend facilitated a warm introduction for a founder. The founder who requested the introduction didn’t tell my friend that they had already pitched Panache (twice).
After we announced Panache’s new $100M fund, multiple founders reached out to me who had previously spoken to at least one other person at Panache.
All of these outreaches had two things in common:
The founder had previously received a ‘no’ from someone else at Panache
The founder made no mention of this fact when they reached out to me
Look, I get it. As a former founder, I completely understand and empathize with the desire to approach an investor from multiple angles when fundraising. In fact, at some point I probably did the same thing.
But it’s not going to work. Let me explain why…
It’s Dishonest
I’m going to start by being very blunt: this approach is dishonest.
It may not seem that bad. In fact, it probably seems like good ol’ fashioned persistence. But inherent in this is an intentional attempt to “trick” the investor. In this fantasy world, the new partner meets you and gets swept off their feet before ever realizing that you’ve spoken to someone else at the firm.
But that’s not how it works.
Have you heard of a CRM? VCs have them too. 😉
The very first thing I do when I receive an introduction to a new founder is look in our CRM. Is the company on our radar? Do we have any information about them? Has anyone at the firm spoken to them before?
If I find prior communication between one of my teammates and the founder – especially if it was recent – then that founder is likely in the hole with me. Why? Because they tried to mislead me in our very first interaction.
Partnerships are Based on Trust
If the person you spoke to previously was an analyst or associate, there is actually a chance you could get a do-over (I’ll get to that later), but if you already spoke with another partner, the result will likely be the same.
Why? Because partnerships are based on trust.
In order for a VC (or any other partnership) to function, the partners have to implicitly trust each other’s decision-making. If a startup was already evaluated by one of my partners, I presume that they were thoughtful in their analysis. Moreover, I trust that if my partner had wanted my input on the decision, then they would have asked me for it. So I’m going to presume that my partner’s decision was the correct one.
That doesn’t mean partners always make the right decision, but trusting in their decision-making is essential to the success of the firm. If partners were to start second-guessing each others decisions, then trust would be lost and the partnership would struggle to function.
No Doesn’t Always Mean No
The flip side of the coin is that not all “no”s are equal.
You might have been rejected very early on, before your value proposition was clear. Your company might have since pivoted, secured a big-name customer or discovered an amazing insight.
Or the rejection might have been from a junior associate or analyst who just didn’t “get it.”
It’s possible to get a second chance, but you have to do it the right way:
1. Go Back to the Original Partner
If your prior interaction was with a partner, then your best bet is to re-approach them with a specific, intentional update that answers the question: “what has fundamentally changed since last time we spoke?”
If they rejected you because the market was too small, how/why is that no longer the case?
If they rejected you because you were too early, explain the progress you’ve made and how that de-risks the company
If they rejected you because of concerns over the product or technology, explain how you’ve overcome those concerns
Of course, certain things aren’t going to change (at least, not from the investor’s perspective). If a VC turned you down because they don’t invest in your space, don’t believe in your thesis or have a competitive investment, absent a hard pivot you’re not to get a different response.
2. Go Back to the Original Analyst/Associate
If your prior interaction was with an analyst/associate and you believe that their concerns were valid, then going back to that person in a similar manner is likely the best approach. They already know you and re-approaching them shows respect for them and their position within the firm.
3. Approach a New Partner
If your prior interaction was with an analyst/associate and you believe that their concerns were not valid (or their understanding of your business was off), then it’s possible to re-approach the firm via a new person, but it has to be done carefully.
First off, if you’re going to approach a new person, it should be someone more senior. Approaching a second analyst/associate is unlikely to change the outcome, for the same reason why switching partners doesn’t work.
Secondly, you cannot (and should not) presume that the analyst/associate’s decision was made in a vacuum. In fact, it’s quite likely that a partner was involved. At most firms, junior team members regularly walk through their deals with a partner in order to get feedback and learn. So while your rejection may have come from the analyst/associate, the actual decision might have been made or influenced by someone else.
Finally, you need to be transparent when approaching the partner that you have already spoken to someone at the firm. If someone in your network is facilitating a warm intro, ask them to telegraph the fact that you spoke with a junior person awhile ago and think that they might have missed something. (Ideally, the partner you’re approaching is an expert in your space, so you can naturally appeal to their expertise and ego.) If you’re approaching the partner via a cold email or other means, be up front about why you were rejected and what’s changed (or what you feel was missed).
VCs Love Second Chances
As investors, a big part of our job is making decisions based on very limited information. And we often get it wrong.
Which is why so many VCs clamor for lines instead of dots.
So if you’ve previously been rejected by an investor and have addressed their concerns, don’t be afraid to circle back with them.
If you think they made a mistake, there’s still a possibility of an investment, but you have to tread carefully and understand that everyone in the firm is on the same team.
