- Houck's Newsletter
- How Investors Secretly Tell Founders They're Not Interested
How Investors Secretly Tell Founders They're Not Interested
It can be hard to tell sometimes tbh, but here's how
A founder I know is fundraising and had a meeting with a well-known VC this week. After the call, they texted me saying it went really well.
“How do you know?” I asked.
They responded with “well they really seemed to understand our vision, and didn’t really push back on anything. Lots of good energy.”
After asking some follow ups I let them know the bad news: the chances of them getting a check from that investor were near zero.
This happens a lot. Most founders don’t know how to “speak VC” because they have never been a VC.
But this week I’m sharing some counterintuitive signals you’ll get from investors and what they actually mean.
Also, I have a quick ask — please reply to this email and tell me what city you’re based in. If you’re nomadic please just use the city you’re planning to spend the most time in this year. I’ll be launching something soon to help you connect with other founders in your city.
11 Signs Investors Aren’t Interested
One important caveat: there are exceptions to every rule on this list. But, as general rules, they’re helpful to avoid wasted time and roller coaster emotions.
No Pushback or Hard Questions
If you’re not getting questions, you’re not getting money.
Startups are new, different, and have an opinion on how to solve a problem and interested investors want to challenge that to make sure it will stand up under the scrutiny of the market.
If an investor is passively nodding in agreement with everything you say, they either don’t know or care about the problem you’re solving, or they’ve already decided to pass for some other reason.
This is the most common thing founders miss.
No pushback means the call didn’t go well.
No Feedback on How to Improve
Similarly, if an investor is interested in your deal they’ll often give critical feedback for how to improve the pitch, product, or something else.
This is a great signal that they care about the success of the company and want your round to be successful.
No Introductions to their Network
Investors who are interested want to derisk a potential investment. The best way for them to do that is by getting more datapoints from people they trust.
They may introduce you to other investors they know to help fill out the round or, more commonly, potential customers who fit your target persona.
This isn’t unselfish — they’ll ask those people for their thoughts on your product.
Not Selling You on Their Firm
Capital is a commodity. When VCs want in on a deal, they’ll sell you on everything else about what their firm can offer.
This can take a lot of different forms:
Talking about how big and relevant their network is
Talking about other partners at the firm who can help you with something specific
How available they will be to get in the trenches with you
Emphasizing their past experience and expertise in your sector
Bragging about previous successful founders they’ve backed
Mentioning perks like free office space and other services
If they’re not spending the last few minutes of a call doing this, and/or doing it over email, then they simply don’t think they need to because they don’t anticipate fighting for the deal.
No Blind Reference Checks or Diligence
Another way interested investors get datapoints is by talking to people who know you, about you. Ideally for them these are people they already know who can provide feedback as a trusted, warm source.
Regardless, they’ll typically want to hear this from sources you don’t provide them (they’ll trust this type of feedback more since you had no chance to prep the person).
If you hear from someone you know that an investor reached out to learn more about you, that’s a good sign that they’re preparing to offer capital.
Overemphasis on Valuation
If your startup becomes a unicorn and has a massive liquidity event, whether an investor invested at a $20M or $26M valuation will matter very little, in relative terms — it will be a massively successful investment regardless and everyone will be happy about that.
So if an investor is getting hung up on the cap of your round, it’s a potential sign that they are looking for a “polite” way out of investing.
Anyone who’s done investing before will be mad at that idea. They’ll tell you that their fund has ownership targets and that they need to do right by their partners by staying within their agreed upon range.
Those things are both true — funds have strategies for how to return the most capital, based around ownership targets (I’ll do a deep dive on fund math at some point).
But the truth is that when an investor is truly excited about a deal, they’ll go to bat for you to their partners and push them to see why this is a good deal regardless.
You Can’t Get Past Junior Partners
Having confusing trouble getting a junior member of the investing team to introduce you to a GP?
It probably means:
They’ve mentioned you but sold your startup poorly
They’ve mentioned you and the GP isn’t interested
They haven't mentioned you because they’re not confident the GP would be interested
There’s not much you can do in the middle scenario, but for the other two you can better educate them on the opportunity.
There’s also another scenario where you got connected to a GP but they passed you off to meet with a junior partner. This is ok… unless you’re then having trouble getting a call with the GP afterwards.
Also note that it can be tough to assess how senior VCs are sometimes. In particular, the title “Partner” can be confusing at larger firms. Each firm treats titles differently, but a good tactic is to go to Crunchbase and see what deals the partner has been the lead investor for. Decision makers lead deals and junior partners typically do not.
No Clear Next Steps After a Meeting
Venture firms each have standard processes for what to do next after meeting with a founder.
If you’re not hearing about what the next step in that process is, or if you get a vague answer when you ask, it means that the investor likely has no intention of actually doing the next step in the process for your deal.
Unresponsiveness or Vague Communication
Hot deals go fast, and are competitive.
Investors know this. They lament missing out on big deals for years or even decades because a single deal can make their career.
If an investor wants to back you, they won’t leave you hanging around. You’ll hear back from emails within a day (or a few at the most). If it takes them more than that to reply more than once, they aren’t that into your deal.
Repeated Requests for Information
Does an investor keep asking you for more data about your startup, or opinions on the market, but without sharing anything about how they are moving towards writing a check?
This could be a red flag where they’re fishing for information to either help an existing portfolio company or, more commonly, evaluate another similar startup that they’re more seriously interested in backing.
There’s always the chance that you surprise them in these situations, and they invest, but it becomes less and less likely as time goes on. If you have a bad vibe, consider being careful about what you share.
Lack of Preparation for Calls
I’ve actually heard of a few investors who intentionally don’t prepare before a call, but in most cases if you’ve sent a deck over and the investor hasn’t read it before the call, it’s a datapoint that maybe they aren’t that excited about the idea.
When investors are excited, they want to make sure the time they get on a call with you is packed with value and answers their questions — it’s not the place for them to get just a TLDR on the idea.
📚️ Founder’s Library
📖 Olly Richards put together a giant, 117-page case study about how he’s scaled his business to $10M. When he sent it to me I have to admit I was pretty impressed at the depth. Seems relevant not just for creators and coaches but anyone looking for creative solutions to scale with a super lean team.
🏦 If sending your deal to 1 investor is good, then sending it to 15 via a single form must be… great, right? That’s the premise behind Seed Checks, an interesting new initiative masterminded by Julian Shapiro.
💡 How I Can Help
Whenever you’re ready, here are 2 ways for us to work together:
⚙️ Grab time with me for a 1:1 session on fundraising, GTM and growth, hiring, finding PMF, or anything else
🚀 Promote your startup to 29,000+ founders by sponsoring this newsletter
As a reminder, I’m testing a new way for you to connect with other founders who read my newsletter in your city. If you’re interested in helping out, reply to this email with the city you’ll be in the most for the rest of this year.