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Initially published on Medium — April 20, 2016


By far, the most difficult part of being a venture capitalist is passing on companies.

As a new VC, I have the honor to speak with hundreds (if not thousands) of founders every year. However, the truth is only a handful of those will end up being portfolio companies. Given that fact, we pass on a lot of companies. Ludlow is a small firm, so I am often tasked with contacting founders with our investment decisions.

Regardless of whether I was introduced to a company from a portfolio company founder, a close colleague, or it was sourced via a cold e-mail — it is never easy to pass on startups.

It’s not hard because I think I’m going to regret passing, it’s difficult because I know the amount of blood, sweat, and tears that founders put into these companies.

Every founder I talk to, I do my best to understand what they have sacrificed. A large majority of them leave very “cushy” jobs at top technology companies to start companies. Heck…a lot of them even have families that they need to support. I do my best to not let these sacrifices sway my investment decisions, instead use these sacrifices as motivation for me to help and support as much as possible.

In reality, a large majority of the founders I speak to still end up raising a round of financing. However, the thought that these founders were likely excited to see an e-mail from Ludlow — only to learn that we wouldn’t be participating — is pretty crushing to me.

It’s why we, at Ludlow, make it such a high priority to have a quick, clear, and transparent process with our founders.

I’m not sure if other VCs share the same level of empathy that I feel, but my guess is that some of the best do. The truth is that this is a topic that is rarely talked about in our community. The amount of horror stories I’ve heard from founders about VC firms “stringing” them along for weeks only to pass, is far too high.

I know that if I was a founder I would greatly respect quick, transparent passes with explanations versus a firm that strings me along for a couple of weeks hoping to get into the deal (if something changes).

Every company I’ve passed on has heard something along the lines of:

Nothing would make us happier than to see you continue to thrive, and kick ourselves for not joining in when we might have had a chance.

I think this perfectly summarizes how I feel about passing. Just because our firm is passing, doesn’t mean that we aren’t going to be helpful and cheering you on — because we will be.

Fundraising isn’t always fun, but we strive to make the process quick, transparent, and respectful.

The biggest piece of advice that I can offer to founders fundraising is:

Don’t always take a firms decision or reasoning at face-value, push a little bit harder to find out the real reason.

A lot of investors unintentionally (or intentionally) write vague pass e-mails, as a way to keep the deal “warm;” however, in my limited experience founders will always respect truth and candidness over vague reasoning.