Ever had this response to a pitch meeting? “Really exciting stuff, would love to work with you, please come back and see me when you’re formally fundraising.”
As many of you probably know by now, a VC gives that response to founders all the time. It’s extremely common. It’s really the only answer that makes sense for a VC to give to a founder. The reason is VCs give that answer is to preserve option value. We at least recognize that we are wrong a lot, and there is always a chance of breakout success, and therefore when we see something that has potential but hasn’t broken out yet, we’ll try to preserve option value and make sure we get a chance to invest at a later date.
Delaying decisions as long as possible is a clear strategy in gambling. People want to gain as much information as possible before making a bet. That’s why the dealer declares “no more bets” at the roulette wheel once the ball starts slowing down.
This behavior can be misinterpreted by the recipient of the feedback. When a founder has a bunch of meetings and receives a universal “this is really interesting, would love to see you again in a few months,” answer — it can be misleading. It can lead founders to thinking that the next fundraising process is going to be easy. It can lead to false hopes
This dynamic also plays out in many other areas besides the VC / Founder relationship. It happens in enterprise sales when big companies have lots of different pilot projects going on to see if anything pans out. It happens in personal dating sites where a user might like 1,000 profiles. And guess what — it happens to VCs all the time when we have to go out and pitch big LPs (limited partners). Obtaining and leveraging option value is a common theme across many different areas.
For the individual, be aware why people are responding to you the way they are. Don’t read too much into positive replies from meetings that have no real commitment from the other person. My advice would be to get people to put skin in the game early. Don’t let people coast along preserving option value and wasting your precious time.