“Do you want to give up?” My cofounder, “Randy” asked me. I had just completed my Sunday morning run, and we were talking about what to do after a very well known Sand Hill Road venture capital fund had just passed on us at the last minute.
It was November, and we had been raising money since January of the previous year. 63 VC firms had passed on us already, and this last rejection was particularly vicious. They passed at the last minute because they lost faith in me.
The VC fund’s rejection, which was solely based on bad “back-door” reference checks on me, had shaken me to my core. I had told my cofounders what had happened, so Randy’s question was a reasonable one to ask.
You should look at your options for funding before you give up.
I thought about Randy’s question. There were only a handful of VCs left on our list that might fund our company.
There was Sequoia Capital, who we were already talking to. There was Tallwood who we were about to be introduced to, and there was “Donald Ventures” where Randy thought “Raul,” a partner at Donald Ventures, might be a good fit because he had backed the company Randy worked at previously, Linear Technology. Linear was one of the most successful Analog Semiconductor companies ever.
There were a couple issues with Donald Ventures. The first issue was they had already passed on twice, including Donald himself passing. The second issue was Donald Ventures and Raul had the reputations for not being very startup friendly. If you’re wondering what not being startup friendly means, it means that a venture fund is likely to pull the plug on their investment at the first time of trouble.
Do you really want to give up on your dream when there is even a small glimmer of hope?
The sting of the rejection earlier in the week was still with me. I didn’t want to experience another investor telling me they were passing because they heard I was difficult to work with.
But there was nothing I could do about that. We had these three options still available to us, and I knew I would likely never have a chance to start another company again.
I didn’t want to spend the rest of my life wondering whether we would have received funding if we had continued raising money. I wanted to leave it all on the field, so to speak.
Only you can decide when the right time to give up on your dream is.
“Yes I do want to continue,” I said to Randy. “Can you reach out to Raul today?”
One week later Randy and I had an introductory call with Raul. The call went well and Raul said he would let me know whether they would move forward shortly.
The next Monday morning I received a call from Raul’s assistant. She said Raul wanted to speak to me at 9:30AM.
At 9:30AM the phone rang. I braced myself for rejection. After exchanging pleasantries, Raul got quickly to the point, “The answer is not no,” he said.
We arranged to meet for a face to face meeting. Two meetings later, Raul said Donald Ventures was ready to invest, but he wanted to have one meeting with my fellow cofounders.
So, on a Thursday morning we met with Raul. Raul again got right to the point.
“I’ve been doing research on you (the team), and I have some questions. Who should I start with?”
“You can start with me,” I said.
“What would you say people that worked with you would say about you?”
I knew exactly what Raul wanted to hear. “I think you’ve probably heard that some people have said that I can be I really tough and difficult to work with.”
I looked across the table, and Raul was pointing furiously at his notebook to the two associates that were working on the deal with him. I had confirmed what he had heard.
My honesty was the piece of diligence Raul needed before committing to invest in our company. That’s all it took. 63 investors passing and some honesty on my part to raise our funding.
The lesson here isn’t that if you just persevere and stick with it that you will get funded. We got lucky because It could have easily gone the other way.
The lesson here is that by putting yourself out there, and learning from your mistakes, you give yourself the chance of getting funded. And that’s all you can ask for.
For more, read: Five Reasons Why You Should Avoid Raising Venture Capital