Passing with Entrepreneurs

I had a great conversation last night with Rob Go from NextView Ventures and successful serial entrepreneur Wayne Chang, a welcome addition to the Boston angel scene.  We were talking about investing strategy and the topic of passing on investments came up.

The biggest downside of being an investor, which is an otherwise amazing role, is turning down entrepreneurs. We pass on 99% of the opportunities we review, some of which are run or advised by our close friends and contacts who are passionate about their companies. 

It’s not easy to tell someone that you’re just not that into their idea, but it can be very rewarding if done right.  Mark Suster touched on this in a recent post, noting that investors should provide constructive feedback, with the caveat that we are only one data point that should be mixed with others. 

When passing with entrepreneurs who have taken the time to present their business, I aim to i) be transparent with my reasons for passing, ii) cite specific examples when possible to back up those reasons, iii) share my two cents on how their strategy could be improved, and iv), in some cases, provide introductions to contacts who express an interest in connecting with the company in potential advisory or investment roles.  I have reviewed many quality deals that do not fall within the scope of SoftBank Capital but fit well with other investors.

This approach takes time but in my experience has been beneficial for everyone involved.  Some of my best referrals have come from entrepreneurs that I turned down.