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Before I became a VC -as an early stage entrepreneur pitching to early stage investors- I always sought feedback on rejections to better prepare for the next pitch, but there was one response that always bothered me, “You’re too early”
This line of conversation was often cloaked in inventive wording:
“Come back to me when you have more traction.”
“We really liked you, but you haven’t proven enough yet.”
“I’m not sure you’re ready for us yet.”
“Please keep us updated as you progress.”
“I think we’ll pass on this round, but would love to be part of the next round.”
“We ultimately decided to sit this round out.”
“We have yet to see enough proof points to make an investment.”
“I’d love to see the user traction when it launches, so come back to us then.”
Every one of the above lines was directly or indirectly fed to me by a VC referring to themselves as an “early-stage” investor; Indeed, almost every early-stage entrepreneur I meet has been hit by this rhetoric at some point or another in their fundraising journey.
Hunter Walk, Partner at HomeBrew Ventures, has gone so far as to no longer use the words ‘early-stage’ to describe his firm — believing the term has been corrupted and misused by so many later stage or growth funds that it has become altogether meaningless.
As an entrepreneur, this process felt like an exasperating contradiction in terms, an early-stage investor rejecting me because my company is too early.
If you bill yourself as an early stage VC but consistently employ any of the prior reasons to turn down entrepreneurs, it is either because your fund is not structured for early stage investing, or because you are looking for an easy route to rejection, without having to directly confront real issues that you might see with the business or the team. Negative feedback (though hard to deliver), is vital to help entrepreneurs improve not just their pitches, but their companies in general.
Being an investor — and supporting passionate entrepreneurs working to achieve their dreams — is an amazing job, but one of the toughest parts of what we do is having to constantly say “no”. It might seem like a nice problem to have, but rejecting so many driven, hardworking and intelligent people is emotionally draining, especially if you are genuinely concerned with trying to give quality feedback while rejecting entrepreneurs for the right reasons.
To put matters into perspective: Frontline sees over 1,500 entrepreneurs a year. Of those 1,500 we invest in roughly ten. This means we are saying no to c.1,490 ambitious entrepreneurs every year.
Having personally overseen thousands of rejections, I can see how telling a founder they are “too early” is an easy way out — it is vague enough to apply to any company, not personally directed at the team, and not quantifiable enough to imply the investor can be proven wrong later. That said, at Frontline we take the “early” in early stage investing very seriously. We have multiple ex-entrepreneurs and operators on our team who understand that finding that first cheque to start your business is both critical and incredibly hard. Since we started Frontline five years ago, 50% of our investments have been pre-product and 70% pre-revenue. When we say we like early, we mean it.
Please note, investing this early is not easy. You have a lot fewer data points to base a decision on, and as Rob Go from NextView Ventures details, you need a very different type of due diligence process. At the pre-product stage, entrepreneurs often need a lot more advisory support and a community of fellow founders in the trenches — so a VC’s structure for adding value needs to be designed differently as well.
We’ve built ‘early’ into our DNA when starting Frontline — through the people we hired and the internal processes we built. While early founders may face more challenges, these obstacles and roadblocks are often similar. We spend c. +10% of our fund’s budget every year on Platform. Our Head of Platform, Carolina Küng, leverages her past experience in B2B SaaS startups, to identify common challenges in our portfolio and find efficient and scalable ways to share solutions and critical knowledge amongst our entrepreneurs. Understanding the ins and outs of the start-up journey allows us to leverage the value we add to our companies via peer-to-peer learning initiatives, content campaigns and network access. We don’t just like early — we’ve built ourselves for it.
Variety is crucial in our world, VCs are living, breathing organisms with different visions, challenges and goals. Not every investor is driven to early stage investing — some do not have the risk appetite, and some do not have the structure. As an industry, we should embrace that fact. If you are not equipped to invest early, don’t market yourself as early. You know your business inside out, don’t take the entrepreneur on a wild goose chase.
All of that said, my ask is simple: if you brand yourself as an early-stage investor, please don’t turn down businesses because they are “too early”. Turn them down because the numbers don’t add up, the pain point they are solving for isn’t real, or because the team behind the solution is shaky. Be direct, and be honest — entrepreneurs rely on your feedback to make critical decisions about their business, and the industry needs transparency to ensure that the best and the brightest teams get the right amount of support when they need it the most.
My commitment to the startup community is that you will never hear a no from me because your company is “too early.” At Frontline, we have built ourselves to support actual early-stage companies.