No is the most frequent and likely the most important word VCs should use. There are a variety of ways to say No and a number of ways VCs can be better at it. Brady Bohrmann of Avalon Ventures explains four tips for other venture capitalists.

1. How and Why Venture
Capitalists Should Say No To
An Investment Opportunity
by Brady Bohrmann,
Partner at Avalon Ventures

2. About Brady Bohrmann
Brady has over 20 years of experience as a venture capitalist and
operating executive in both information technology and biotech. His
focus is on early-stage investments and backing talented entrepreneurs.
Throughout his venture capital career, he has worked with over 75
companies. He currently is a director or observer of many Avalon
portfolio companies, including Backupify, Chart.io, Cloudant, Inc., Conjur,
Indix, Juliet Marine Systems, Kaltura, Kinvey, Memrise, Nanigans, Pingup,
Redbooth, Selectable Media, Simulmedia, The Happy Cloud, Twinstrata
and Vook.

3. As an investor, I get to say “Yes” to a variety of
exciting opportunities, but I can’t say “Yes” to
everything. In fact, “No” is the most frequently
and likely most important word I use.

4. There are a variety of ways to say “No” and a number
of ways VCs can be better at it.

5. 1. Define Your Firm
Avalon Ventures is a seed and early stage
technology-focused venture fund with an emphasis
on information technology and life sciences.
By defining what early stage investing means to us,
we are able to stick to it with every investment
opportunity.

6. Defining Your Firm
While there is no one-size-fits-all definition of what
“early stage” entails, it means we are either the
catalyst for starting a company, or the first, and often
only, institutional investor.
Understand what defines your firm.

7. The Opportunity
If a prospective company is solving a real problem,
has a great team, but are not in our industry or are
farther along than we invest in, we have a great
opportunity that we should connect to the right hands.

8. 2. Be Transparent
There are many reasons why a VC may decline
an investment, and most of them have very little
to do with the quality of the opportunity and team.

9. Reasons to Decline an
Investment Opportunity
• Late in a fund cycle
• Have enough exposure in a given area
• Deem the opportunity as competitive or
too close to an existing investment
• Short on bandwidth at the moment

10. Honesty and Transparency
Trump All
Some VC’s take meetings for the purpose of:
• Educating themselves about a market
• To conduct due diligence on a competitive opportunity
However, I believe we need to be honest with ourselves
and the entrepreneurs. If we have genuine interest in a
space or company then fine, but we should not take a
meeting if we know we have no intention of investing.

11. 3. Be Constructive
Saying “No” in a constructive way is good for the VC,
the company and the startup ecosystem.

12. Relational Currency
Building relational currency is another way VCs can
show support for an idea or company and avoid
burning a bridge.
Whenever possible, try to add something of value to
the company.

13. an example:
Relational currency can include:
• Introductions to investors, partners, customers
• Offering constructive feedback on the plan

14. The Benefits
Market disruption is an uphill battle that VCs and
Entrepreneurs fight together.
When we come across people doing the same hard work
in a different camp, we need to encourage and connect
them.
Doing so benefits startup culture as a whole.

15. 4. Actually Say “No”
When a startup is not a fit for you, or another
firm you’re acquainted with, it is important to
actually say “No.”
Doing so shows respect for the company and
allows them to continue their search for the right
partnership.

16. an example:
Mark Suster, VC and two-time entrepreneur,
recommends writing a personal response, but
streamlining the way you talk about opportunities you
cannot take advantage of.
This ensures that you respond in a timely manner,
allowing that opportunity to find someone who can be
involved.

17. It’s Our Job To Say “No”
Saying “No” is an important part of our job and
responsibility as a VC.
It makes the opportunities we say “Yes” to all the
more exciting.

18. The Takeaway
VCs need to be better at saying “No.”
Making an effort to be better at closing
the loop prevents ruining a relationship
and your reputation as a VC.

19. Learn more!
Visit http://avalon-ventures.com/blog for more actionable advice
on early stage startups, VC funding and other entrepreneurial tips.