I have to say “No”; alot. In fact, every one of us investor-types says “No” much more than we say yes. How we say “No” matters; alot.
Sometimes, you don’t know you have said “No” well until years after the fact. Today, I had one of those moments. Several weeks ago, Todd Vernon, founder and former CEO of Lijit and now, founder and CEO of VictorOps asked to have lunch. I didn’t ask the topic, because we’ve known Todd for a long time and because I like Todd. We had lunch today.
Among other things, Todd wanted to thank me for the way we turned him down during a 2010 fundraising for Lijit. We gave Lijit a ton of consideration, digging deeply into the customer acquisition model. We wanted to understand the mechanics of how the business would scale to hit the revenue projections Todd and team put out. Ultimately, we identified some “breaks” in the model that told us that without some re-engineering of the customer acquisition model, the Company wouldn’t hit its plan. We laid out our analysis in a presentation we delivered to Todd. Because, at the time, neither we nor Todd and his team knew how to address the issues we had identified, we turned the opportunity to invest in Lijit down.
Todd ended up getting Lijit financed. As importantly, he and his team cracked the code on the customer acquisition issues we had identified. Today, Lijit is thriving inside Federated Media, which acquired the Company in 2011.
I was so pleased to hear, in some small part, that Todd felt we helped him to flesh out the issues that might be holding Lijit back. Surely, Todd and his team would have ultimately identified the issues with their customer acquisition model and figured it out on their own. So perhaps all we did is serve to accelerate the inevitable problem solving Todd and his team would have done on their own.
In any event, I’m reminded that how we turn down an investment opportunity is critical and that we should strive to have entrepreneurs with whom we engage feel that they have taken something away from their interaction with us, even if we say “No”.
As a side-bar, looking at Todd’s Twitter feed today, I learned he is a Rush fan. I knew there was a reason I like him!