Focusing is About Saying No
On more than one occasion it has occurred to me that my job as a venture capitalist can easily be reduced to lots of meetings after which I repeatedly say “no” and very seldom say “yes.” During any given day I will typically decline to take a couple meetings, reject several business proposals, nix a candidate for my portfolio company and fend off a banker angling for an introduction to a prominent portfolio CEO. For those on the receiving end, I may be seen as skeptical, unhelpful, too risk averse or just someone who doesn’t understand. I don’t necessarily reject any of these descriptions. Not only because they may be accurate at times, but because they are essential to me performing my job.
A VC’s job is not just to find and invest in the winners but also to avoid the mistakes. It is surprisingly easy to be drawn to the wrong company only to find yourself working for many years simply to recoup your initial investment. The wrong investment will hobble me, consuming my time and weakening my self-confidence. As an early stage investor, knowing the types of investment opportunities I do not want to pursue is as crucial as knowing what opportunities I do want to chase down. Moreover, my ability to swiftly and confidently say ‘no’ is what allows me to swiftly and rapidly say ‘yes’ when there is a match.
After years of saying ‘no’ myself, I’ve developed a lot of respect for founders who can do the same. I’ve discovered that the best early stage CEOs are also in the business of saying “no,” although they don’t always recognize it. Lacking a history or working model, early stage CEOs are presented with endless possibilities on product, go-to-market strategy, financing, recruiting and customers. Too often entrepreneurs take the ‘yes route’ which is essentially a route of minimal resistance. The first seed fund that makes an offer. That product idea that got you funded. The first type of customer type that expressed interest. This may work out, but invariably these CEOs will find they have made some bad decisions along the way.
A startup’s business strategy and plan are as much about what it will not to do, as it is about what it will do. You can’t have one without the other. As VCs and board members, we often invoke the need for the company to maintain focus, but deciding on and maintaining such focus requires the foresight and confidence to say ‘no.’
- “No” to your R&D team that wants to add more features over the objection of your VP Product.
- “No” to that potential investor who offers a compelling CLA, but has a mixed reputation.
- “No” to that large, esteemed enterprise customer, who requires an on-premise deployment of your SaaS product.
- “No” to that offer of a joint venture in some large Asian market; and
- “No” to your VC who may offer an introduction or idea that is not in your focus.
A founder who knows what he or she will reject will have an easier time executing on their plan. Focus must be exclusionary if it is to have any meaning, especially in the early years of a startup’s life.
We too often concentrate on the power vested in us as VCs and CEOs to say “yes.” But like anyone granted such authority, it’s wisdom that determines if the right decisions are made and wrong decisions avoided. The power to say no is an essential part of building a company, as it means you have considered and given thought to all that you will not do in favor of what you will do. And it’s the VC’s role to remind founders of this important point so they can then say ‘yes’ with even greater confidence and resolve.
