Having worked with a lot of angel investors, and venture firms over the years, there are a few key reasons why you don’t get timely follow-up (if not a complete lack of follow-up).
The first and foremost reason is that your deal is just not that interesting. Whether it’s your team, your product or service, or your market, an investor portfolio, criteria or focus fit (or something else), if an investor of any type does not get back with you, you can take that as a signal that they’re just not interested.
Of course there are occasions where something may have happened outside of your control such as an Angel investor really likes your deal but had to move a different direction or stop investing for the moment etc., but generally by not getting back with you they are showing you they are not interested.
Working with investors is like selling a product or service. You’re calling on your prospects (investors) pitching your product or service (company) and doing your best to have them buy (invest). However we all know that when we are selling a product or service, many of our prospects never get back with us. Think of people that have sold to you over the years. Most of us, honestly, simply do not answer emails or phone calls if we are not interested. So the behavior is the same whether it’s an investor or a sales prospect. As a result you will probably find that a few will follow up and let you know your status with them, but some will not.
The second reason you may not get a (timely) response is that they don’t want to tell you “no”.
Here’s why. It’s obvious that when betting on startups, the odds are against a startup getting to exit and monetizing for the investors, so at times, even the top-tier VC get it wrong. So if we assume that the bets they place are sometimes wrong (in some cases the numbers show that 9 out of 10 investments fail) then we have to assume that the deals they turned down could sometimes be wrong decisions as well. Let me restate: if the top-tier firms can be wrong regarding their investments, then they could be wrong about turning you down as well.
This is why they don’t want to tell you “no”. What if you got funded by one of their competitors and all of a sudden your company caught on and scaled? Nobody wants to miss out on the next best thing even if they turned it down initially. So by telling you “no”, they may close the door, or certainly limit future opportunities to work with you.
But, by not replying, the door is always open as the investor can circle back if and when you get traction.
In my experience I found some investors will tell you what you need to do to gain their investment (as long as it’s not fundamentally against their portfolio focus). “Go out and get 1 million users and then circle back”, “get to 10,000 daily active users, send me the metrics and we will talk”, “sign-up 10 customers, let me talk with them and we can take a look at that time”. These are just some of the responses I’ve had over the years.
The two words that will attract just about any investor are ‘traction’ and ‘scalability’. If you have both of these, you can bet that you’ll have great audiences and many investors will get back with you.
Now there are still some other reasons why investors won’t circle back but they are certainly less important than the reasons above. Of course investors are seeing enormous deal flow these days. So you can expect that top-tier investors may see over 1000 deals per month and even angels may see dozens of deals per month. There is simply not enough time to get back with everybody. But you can bet if you have scalability and traction, and they are interested, they will get back. So the rules still apply.
Here’s the best advice I can give when investors don’t get back with you. First, always keep things positive and keep sending them information about the company. Assume that they are a fan of yours even if they didn’t respond. Let them know about positive updates and traction. Again everybody wants in on the best deals so by keeping all of your potential investors updated, you have a great chance of them circling back later.
Don’t take it personally if they don’t respond. Again, if you’ve ever tried to sell something to someone, and they didn’t respond you know as well as I do that taking it personally is just the wrong thing to do.
Another thing you can do is ask the investor what you need to do to become more interesting. So let’s say you pitch, and the investor says that you will get back with you but they don’t. Instead of pinging them to ask their interest, just already assume they’re not interested because they didn’t get back with you. So why not call them or send them a note and ask how you can improve or progress to gain their interest. What do you need to do? In many cases they will let you know then why they did not invest and what you need to do to become interesting to them.
Make investors your friends. You never know when you may have a company they are interested in or they may have contacts which they can refer. Just because investors not interested at this time doesn’t mean that they won’t be interested in something you have later. I found in life all negotiations are circular, meaning there is a good chance you will come back around later, and sometimes you’re very surprised at how close you were to a deal.