Demystifying the Feedback Conundrum: Why VCs Don’t Give Good Feedback
Feedback is a powerful tool in the startup world, and when properly utilized, it can profoundly impact the trajectory of a start-up. Despite this, many entrepreneurs share a common frustration: Venture Capitalists (VCs) seemingly provide subpar feedback. This perplexing scenario often leaves entrepreneurs scratching their heads, yearning for meaningful input to improve their chances of securing funding in the future.
To comprehend this conundrum, we need first to understand VCs’ unique position in the business ecosystem. Let’s peel back the curtain on the VC world, to understand why they might not always provide the good, actionable feedback that founders crave.
The Pressures of Deal Flow
<I know, this sounds like a 1% problem, poor VCs! But it affects how they provide feedback> VCs are continually flooded with pitches. According to data from Fundable, only about 0.05% of startups are venture-backed. This statistic means that VCs must be exceedingly selective, wisely investing their time and resources. They often have to make quick decisions about the potential of hundreds, if not thousands, of startups, leaving little time for detailed, tailored feedback.
Mismatched Expectations
VCs and founders often have a mismatch in feedback expectations. Founders often yearn for detailed and constructive criticism, seeing it as a golden ticket to refine their business strategies. Conversely, due to time constraints and the sheer volume of pitches they handle, VCs lean towards binary responses: they’re either in or out. Or the most common version, come see us again when you have traction.
The Risk of Legal Repercussions
In today’s litigious society, VCs tread carefully to avoid legal implications. Giving detailed feedback can occasionally backfire, especially if a founder misinterprets the advice or feels it led them astray. Consequently, VCs may play it safe, offering less detailed feedback to shield themselves from potential legal conflicts.
Managing Relationships
VCs also have to manage relationships within their business ecosystem. They must balance their relationships with entrepreneurs, co-investors, and limited partners. VCs may be reluctant to offer feedback that could potentially sour a relationship or burn a bridge. Since the start-up world is closely-knit, preserving relationships often takes precedence over offering critical feedback.
There is no upside in providing feedback to founders! If the founder takes the feedback the wrong way, they bash the VC with other founders… For most VCs it’s just not worth the effort.
The Silver Lining: Navigating VC Feedback
Entrepreneurs may find the lack of detailed feedback from VCs frustrating, but it’s not all doom and gloom. Understanding the constraints VCs work under can help temper expectations and allow entrepreneurs to take the most from their interactions.
Here are a few ways entrepreneurs can make the most out of their VC interactions:
1. Do your homework: VCs specialize in certain sectors. Researching and understanding a VC’s domain can help you tailor your pitch to their interests, increasing the chance of receiving funding and garnering insightful feedback.
2. Seek feedback elsewhere: While VC feedback is valuable, it’s not the only source of insights. Seek feedback from mentors, industry peers, and customers. Their perspectives can help you refine your business strategy and pitch.
3. Decode VC language: Learn to decode the language VCs use. Statements like “It’s too early for us” can mean your venture lacks traction. “I’m not sure about the market size” might suggest you need to demonstrate the potential market opportunity better.
4. Be proactive: Ask for feedback directly. If you’ve established rapport, the VC might be more willing to share some thoughts. However, understand that you might still receive a distilled version due to time constraints.
It’s essential to remember that VCs’ primary role is not to provide feedback but to find and invest in promising businesses that align with their portfolio. Their lack of detailed feedback isn’t personal—it’s a function of their position and the realities of their work. By better understanding their perspective, entrepreneurs can recalibrate their expectations, approach interactions with VCs more effectively, and leverage other sources to gain the valuable feedback necessary to grow their businesses.