The More Time Investors Spend with You, the Less Likely They Are to Invest
When it was time for our A round, I made a list of the top investors I wanted to raise from. You can imagine how happy I was when a meeting with the top firm on my list went extremely well. The partner and I hit it off, and he seemed to love the company and really want to work with us.
The first meeting led to another meeting, then another, and another, and dinner, and another dinner. All in a three-week period. I was running a process with ten other VCs and spending a disproportionate amount of time with this one. I thought it was a good thing, but I was wrong. I fell into the “friend zone” trap. You won’t be surprised to hear that they didn’t invest (but we remained good friends).
Looking back at all of our fundraisings, this situation happens every round with at least one investor. My conclusion is that the more time investors spend with you, the less likely they are to invest.
Don’t get stuck in the “friend zone”
You might think it’s because they discovered something that made them not invest, but that’s not the case. I have learned that they genuinely like you or the company and really want to work with you. But they don’t have enough conviction to invest, so spend more and more time, hoping that more information will help them get there. The sad truth is that they never will. I call this the “friend zone.” You have an investor that really likes you but will never make the move.
All the investors that ended up presenting a term sheet had a strong conviction from the beginning and ran a fast process. They did not waste time asking for another meeting one after the other. They did not waste time trying to answer questions that had no answer. They wanted to invest and they acted like it.
Next time you’re fundraising and have an investor that wants to spend disproportionate time with you compared to others, ask yourself if it’s worth it and if they will actually invest, or if you’re wasting your valuable time.
The best advice on this I got was from one of our investors. There was a VC that I really wanted as an investor, so I fell into the “friend zone” with the hopes that this time it would be different. When I spoke to our investor about it he said, “Liran, if they wanted to invest, they would have invested.” So true!
