Investors who continually ask for more data never get to yes (Oversubscribed Weekly #33)

Max here. A huge thanks to the many of you who wrote in to say you’d like to hear the full story of Castle shutting down. We’ve heard you, and I will be delivering on that tale—but not this week, as it’s going to take a bit of time to get right. Stay tuned!

In the meantime, I’d like to talk about one of the biggest mistakes I made early on in my fundraising career: continuing to push on investors who seemed like they were just one data point away from getting to a yes, but who in reality were never going to.

In Castle’s earliest days, I’d often have investor conversations that went like this: I’d give my initial pitch, the investor would request some additional materials, I’d get them that data, and then… nothing. I’d follow up to check in, and they’d indicate they were still considering the deal, and request even more materials, which I’d get them—sometimes after creating it from scratch just for them—and then… nothing.

Every time I sent one of these investors the latest materials, I thought that this data set, this set of projections, this marketing plan would be the one that finally convinced them to commit. But it never was.

In early-stage fundraising, an investor who continually asks for more data is almost never going to get to yes—because early-stage investment decisions aren’t made based on data. Good investors don’t ask super young companies for reams of documents.

Asking a startup with $4k in monthly revenue and twelve customers for five-year projections is like asking a baby for SAT scores.

Version One Ventures cofounder Boris Wertz says it well:

Investors w/ conviction don’t ask “who else is in”. Investors w/ conviction don’t ask for detailed financial projections for a seed round. Investors w/ conviction don’t need to see more traction. Investors w/ conviction buy into your vision & are excited to help you realize it!

— Boris Wertz (@bwertz) August 1, 2019

Good early-stage investors make a gut decision quickly. They may ask for more data in order to confirm or change their decision, but if they aren’t at least a tentative yes early on, they’re almost never going to be convinced by more data. Accept that they’re a no and move on to new leads who are excited about what you’re building.

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