When pitching, VCs may not always be impressed with your company or your idea.
They may start attacking your idea, and you may decide it’s natural to counterattack. However, if you respond to their feedback poorly, even inadvertently, you could end up hurting your relationships with these people.
Below I’ve created some sample dialogue on how you can most effectively handle criticism from venture capitalists.
Don’t ignore or dismiss VCs like others. You can learn to react to their feedback well, you’ll not only preserve relationships but also gain valuable information too.
Scenario 1: Opportunity not big enough
VC: Interesting niche. I can’t see how this will give me the returns I want.
FOUNDER: Can you see any other markets we can tap into, that are perhaps larger?
VC: Your idea is focused on the education market. Not only are sales cycles slow, but also the available budget is abysmal. Have you thought about moving upmarket to tap into the F500?
FOUNDER: That’s a great idea. We’d love to tap to the F500. Can you help us get connected into the F500?
VC: My old HBS buddy is the ex-CEO of Goldman, and he runs the monthly executive breakfast at the Harvard Club. Let me connect you.
Scenario 2: too early to market
VC: It’s a fascinating concept, but I just don’t think the consumer is ready for something like this yet. You’re at least 5 maybe 10 years too early.
FOUNDER: That’s an astute observation, and I agree with you. I can see that you follow trends and demonstrate strong empathy for your typical customer. I appreciate hearing your ideas. I think the world would be a better place if consumers adopted our products soon rather than later. They would benefit from X, Y, and Z. We have a couple of ideas on how we can get to the market earlier including A, B, and C. Do you think I’m missing any?
VC: All three are intriguing, especially C. But how about D?
FOUNDER: D is especially fascinating. How do you think that would work?
Scenario 3: no competitive differentiator
VC: One of my concerns involves the emphasis on GPT-3. GPT-3 licenses are starting to become broadly available. How would you differentiate yourself from other copywriting tools in the space?
FOUNDER: That’s a good point. One thing I didn’t mention is that we have an exclusive partnership with X that our competition doesn’t have. This means we’re getting 10X more traffic at 1/3 of the cost. It’s a significant advantage to have a lower CAC and higher lead gen volume. What other ideas do you think we should pursue when it comes to differentiating from our competition?
VC: Have you approached OpenAI for an exclusive partnership?
FOUNDER: That’s a fascinating idea. I hadn’t considered that! What other ideas do you have for our business? I’d like to learn as much as I can from you.
Scenario 4: unfavorable macroeconomic or regulatory trends
VC: One of my concerns revolves around potential regulation in the future. I just don’t see why a government wouldn’t shut down your loophole.
FOUNDER: That’s a valid concern, and you’re absolutely right. To help manage that risk, we’ve started to engage with some lobbyists. We’ve been talking to Glendon Hill. Do you know Remy Danton?
VC: I’m familiar with Glendon; they have a good reputation. Also, my Georgetown classmate, Jackie Sharp, is married to Remy.
FOUNDER: What a small world. It sounds like you’re an expert. when it comes to the DC power-players who can make a difference. Can you recommend any other lobbying firms we should engage with?
Scenario 5: more established competition
VC: Fascinating idea, but why wouldn’t big tech company X crush you like the bug you are?
FOUNDER: Mr. Wonderful, you’re right. Company X can copy our idea, but it’s unlikely they can crush us. We already have 80 of the Fortune 100 company signed up. And they have 10-year agreements with us. If they pursue Company X’s solution, they’ll have to do a lot of explaining to their CFO.
VC: Clever. This is the kind of company I want to back.
Scenario 6: crowded space
VC: Interesting business, but the space can’t support more than 2 large players. As it is, all the players are running up CACs to the moon. This is not for me.
FOUNDER: Our CACs have been going up, and this is a problem. You’ve had some experience running large marketing organizations in some crowded spaces. What do you recommend that we do?
VC: Have you thought about acquiring your competitors so you have more economies of scale?
FOUNDER: That’s brilliant. What other ideas do you have? I’d like to learn as much as I can from you.