Startups Anonymous Est. 2013 · Read-only archive
Questions

How do I know whether a potential investor is stalling vs. actually patiently evaluating the opportunity?

I’ve pitched dozens of VC’s over the last 6-9 months. Most I’ve received clear no’s from but a handful appear very interested and have continued asking questions about the opportunity (including IP strategy review). They’re putting real work in on their side (as far as I can tell), so, I take that as a sign of real interest.

My interpretation is that they are interested but don’t have a sense of urgency to offer up a term sheet. Seems like I’ll need a trigger point (i.e., someone to formally commit money whether they’re leading or not) in order to get this round done. I want to say, “shit or get off the pot!” but that likely would be counterproductive. 🙂 The question here is, how do you tell if someone is just stalling (i.e., not really wanting to say no and politely stringing you along)  vs. just taking their time in the diligence process (and I just need to be patient)?

3 answers from the community

AAnonymous· Jul 1, 2014

It's completely legitimate and polite to ask the ones doing diligence what their process and timeline is for a term sheet.

Unfortunately many VCs like to hang out and collect info and in the process essentially lead you on. Ultimately it's most important to have the "where do we stand" conversation. You'll be able to gauge who's serious about making a commitment.

AAnonymous· Jul 6, 2014

It's perfectly fine to say “shit or get off the pot!” to clear out unserious inquiries. It's all about the delivery: at the start, ask for the VC's timeline and establish your own timeline so that you can say that if we don't get commitment/termsheet by X date, we will assume you're passing and we'll move on. By commitment, I mean a clear statement of "we're in for $XX", and maybe "we'll send termsheet by Xday" and you restate in writing by email and ask them to confirm in their reply (see PG/YC article on handshake protocol).

You should not have to actually be at end or raising process to confirm whether/not the interest was genuine.
You also don't want to fall prey to giving too much proprietary info out to unserious parties, who may then pass it on to your competitors that they pick over you.

AAnonymous· Aug 6, 2014

Here's some advice based on dozens of closed rounds: Keep this vc as a stalking horse. Without a competing bid (btw, you should be out pitching and pitching until you get multiple term sheets), there's no urgency on the part of the vc to take any action. The vc will only move when he knows he's in danger of losing the opportunity. There are artful ways to pressure him; pressing him to declare his intentions is not one of them. You have no leverage in the current situation (so go get some).