How a VC Says No Matters
Venture capital is mostly a business of saying no.
For every investment, there are hundreds of rejections, communicated or not.
Given Venture is a business of finding outliers, this is inevitable. But how a VC says no matters—and most are leaving value on the table by doing the bare minimum.
Founders often hear a polite decline without additional context. That ends the conversation. But it doesn’t have to. When VCs take a moment to offer direction (even pre-canned)—an alternative fund, a relevant platform (such as shipshape.vc, a free investment search engine), or even a list —they help both parties. One is helped immediately (the founder) and the investor in the long run too (reputation amongst founders).
This approach also shares knowledge into a market that is held back by information asymmetry. Sharing knowledge also makes the whole system more efficient, and ultimately, larger, with higher returns (encouraging more capital overall to the system).
Most VCs don’t do this, not because they don’t care, but because it feels time-consuming.
But helping doesn’t mean writing an essay, or risking burning a contact because of a poor fit. Simply by sharing knowledge of resources, a hard ‘no’ can be turned into an alternative ‘yes’.
The Banking Parallel
This problem isn’t unique to finding funding in Venture Capital. Small businesses in the UK have faced the same issue. Banks decline a loan, and historically, that was often the end of the finance-finding mission for businesses. Most business owners didn’t know what alternatives were available (imperfect information), and they didn’t have time to find out.
So the Government encouraged banks to change. If a bank said no, they would point the declined borrower to other options—directories, fintech platforms, anything that could help the business with sourcing their required capital.
Venture faces a similar blind spot. Founders don’t know the full market of investors. If they get a “no” and no further direction, many stall —in many instances their company could be viable, but they’re looking in the wrong places.
Conrad Ford, Chief Product & Strategy Officer at Allica Bank (and founder of Funding Options, who provided such a search function for SME finance alternatives), had the following to contribute:
“SMEs frequently face information gaps, particularly in specialised technology sectors where companies may be pre-revenue and dependent on informed, sector-specific investors.
Market insight is often shaped by local networks, making it difficult to access relevant expertise in niche areas.
Facilitating access to the right information benefits the business and reinforces the credibility of investors, even when declining an opportunity.”
The ‘Alternative Yes’ for Founders
A VC who says no can still be useful. Suggesting resources like shipshape.vc, which lets founders filter investors by cheque size, sector, stage, and whether a fund can lead a round, gives them somewhere to go next. Or pointing to directories from groups like the BVCA or UKBAA, or the EISA helps orient them.
It doesn’t take much. A single templated sentence in a rejection email can redirect a founder’s search and open new doors.
When to Make Introductions—and When Not To
There are cases where a direct introduction makes sense—usually when the misfit is clearly one of thesis, not quality. But intros after a decline can carry unwanted signaling. Use them sparingly, and only when conviction is high.
Feedback is another tool. Thoughtful, specific comments can help a founder iterate faster. And with AI tools now recording most pitch meetings, capturing that feedback is easier than ever. It’s not about writing paragraphs—just flag the core issues and move on.
Why This Matters
Founders often come back. The ones you reject now may be a perfect fit in a year. Or they may refer someone who is. But that only happens if they leave the interaction with a sense that you’re thoughtful, fair, and helpful.
A VC’s brand isn’t built just on what they invest in. It’s built on how they behave when they don’t invest.
Helping founders navigate a “no” well is one of the most underused ways to build long-term reputation, generate better dealflow, and improve the quality of the ecosystem. A small gesture—an “alternative yes”—can compound in ways that are hard to measure, but impossible to ignore.
