This is a repost of a piece I wrote earlier this week on my investing topic only blog that seemed to get good feedback, so sharing here as well, in hopes that it is helpful to you as well.
The post is for GPs who’ve gotten rejections from LPs, but I think the analogy stands if you’re a founder hearing back from a VC, or anyone who is doing any kind of fundraising or sales.
One of the most memorable pieces of relationship advice I’ve gotten is that line. “When she complains about the dishes, it’s not about the dishes.”
By the time your spouse complains about the dishes, it’s a culmination of other pent-up emotions simmering at the surface. And when she says it’s the dishes, it’s not. Potentially it never was. But it may have been the reason that tipped her over the edge.
That said, this is not a post about relationships. I’m not a marriage counselor or a relationship coach. This is a post about rejections. And all the reasons that come with rejections. Or more specifically, about LPs passing on GPs. Or hell, VCs passing on founders.
And yes, I’m going to use gendered language but it’s purely for the purpose of extending this analogy and lesson my friend gave me. So I hope you allow me this literary liberty.
When she complains about you being too early, it’s that she never had conviction over the deal. When she says you need more traction (track record), it’s because she couldn’t see why you would see and win the most interesting deals in your space. What you say has yet to be proven by what you did. So, the underwriting will start now for what you will do. She doesn’t trust you can execute against what you promised. You’re either talking a big game (using superlatives that feel disingenuous) and/or you create a feeling of naivete. Be assured that the best allocators will be keeping track of what you promised before. Even if you, as a GP, rewrite your Docsend pitch deck. Admittedly, still, most won’t.
You will wonder why she backs others with no track record and no prior relationship with her. And 9 out of 10 times, it’s a communication issue in the first (few) meetings. You gave her no reason to generate enough dopamine that would get her to act outside of the meeting.
When she complains about there being higher priority opportunities, your strategy doesn’t align with the organization’s strategy. She likely did some work, and her initial work and/or references discounted the initial enthusiasm she had. She didn’t know how to say no politely and without seeming like an asshole. So only after a few meetings, and only after she’s felt like she’s given you the time and respect she thinks you deserve (whether you accept it or not), she can finally pass. Your problem is you never figured out what her motivations are. What she wants in her career. What her “family” (organization) wants of her. What keeps her up at night. Why she wants to go to work every Monday.
When she complains that there isn’t enough capital to left to deploy, it’s the fact you aren’t good enough to be an exception that would help her raise her next vehicle or to get board approval. Excluding institutions (including family offices) who own their own pool of evergreen capital, anyone who has to ask other stakeholders for more capital to invest has at least 20-30% left to deploy when they go out to raise their next vehicle. The primary motivator for the remainder of capital are people or opportunities that best highlight an allocator’s promise to their stakeholders. Fund-of-funds promise access. That means either a multi-million dollar allocation in Anthropic or an individual (usually spinout, but sometimes highly reputable founder/operator) who’s been early in generational opportunities. Others, like multi-family offices, depending on their mandate, either promise access or their ability to pick great pickers, which means 5X+ DPI in 5 years in a prior fund is extraordinarily exciting. Realized IRR or DPI matter a lot.
When she gives you a whole list of reasons as to why they’re passing, it’s because of the first reason, but she needed a laundry list of reasons to justify the one small thing she felt like she would get judged for. But that small thing came up as a recurring theme again and again, among references, among pushback from her investment committee, among her own doubts she never unearthed with you. One reason is all you need to pass. One reason is all you need. And sometimes, it’s the dirty laundry (i.e. gossiping). Or the speed of your communication. Sometimes, it’s the fact that you boast about another LP competitor in front of them. Sometimes, it’s the fact that you forgot what you talked about in the last meeting. The reasons will always feel like bullshit to you. But trust me, they’re as real, and as meaningful as they get.
When she doesn’t complain at all and just disappears from your life, she didn’t feel safe with you to give you the feedback you ought to hear. She feared your reaction, or at least the expectation of your reaction. You never provided the safe space she needed. It’s likely because of how you talked about others. The more judgmental you are about others, the more she’ll think… if things go awry, will you say the same about me behind my back? Can you even handle any amount of criticism?
There’s another great line on communication, but also on relationships by writer and poet Khalil Gibran. “Between what is said and not meant, and what is meant and not said, most of love is lost.”
If there’s one takeaway you need from this post, whether you’re a LP, there is more love (and reputation) lost in the lack of communication than in overcommunicating.
Photo by Scott Umstattd on Unsplash
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The views expressed on this blogpost are for informational purposes only. None of the views expressed herein constitute legal, investment, business, or tax advice. Any allusions or references to funds or companies are for illustrative purposes only, and should not be relied upon as investment recommendations. Consult a professional investment advisor prior to making any investment decisions.
