Should investors give founders the honest reason for passing?

Paul Graham · published Aug 2013

Investors' stated reasons for investing or passing are post-hoc rationalizations of their impression of the founders, not the real cause of the decision.

Every startup has reasons both for and against; investors focus on whichever set matches their prior impression, and most are genuinely unclear about why they like a startup.

Scope: they aren't necessarily trying to mislead; almost everyone shares this weakness

source How to Convince Investors

Harry Stebbings · published May 1, 2024

'We want to see more traction' really means the investor doesn't believe in you enough, because genuine conviction overrides missing data

Investors who believe will get over the data gap — everyone has done pre-seed and low-data deals

12:37 20VC: Mark Suster on The Biggest Fundraising Lessons for VCs, Why the Correction in Venture is Still to Come, Why Private Equity Will Replace IPOs and M&A as the Exit Path & The Woke Left and a Trump Administration; What Happens?

Mark Goldberg · published Oct 25, 2024

The reasons LPs give for passing are usually not their actual reasons — exactly like VCs telling founders 'it's too early for our fund'

You never really know what people are thinking; the stated reason for their passes was team risk from three GPs who hadn't worked together, which is a real but stated-as-cover concern

Scope: concedes the team risk they cited is genuine

29:42 20VC: The Truth About Multi-Stage Firms; Why Portfolio Services are for VCs not Founders | Why Politics is Rife & Decision-Making is Broken in Large VCs | Why Reserves are Bad for Founders & How Boutique Firms Will Win with Mark Goldberg @ Chemistry

Ryan Petersen · published Jun 20, 2026

Founders should hear the no but ignore the stated reason, because the probability the investor is telling the truth times the probability they are right is too low to carry signal

That was Paul Graham's standing advice to founders

51:40 20VC: Why Remote Work is White Collar Fraud | Why Revenge and Patriotism are the Best Founder Traits | Two Questions Every Founder Needs to Ask | The Wild Story of Raising $1BN from Masa Son in an Hour Long Meeting with Ryan Peterson, Founder @ Flexport

Harry Stebbings · published Jan 20, 2025

Investors should not bother giving founders true feedback on why they passed, because founders will just argue and think you're a jerk

It's not worth the argument — founders will just push back and resent you

33:43 20VC: Why Large Seed Rounds Increase the Chances of Success | When to Sell in Venture | Why Multi-Stage Firms Do Not Do The Work | Is Europe Totally F****** and Why AI Means London Can Compete with the US with Hussein Kanji

Ryan Petersen · published Jun 20, 2026

Ghosting founders after a seemingly good pitch is the majority behaviour among investors

The vast majority of investors he pitched never followed up despite meetings that felt great

Scope: based on his own fundraising experience

50:47 20VC: Why Remote Work is White Collar Fraud | Why Revenge and Patriotism are the Best Founder Traits | Two Questions Every Founder Needs to Ask | The Wild Story of Raising $1BN from Masa Son in an Hour Long Meeting with Ryan Peterson, Founder @ Flexport

Mark Goldberg · published Oct 25, 2024

VCs should give founders strong constructive feedback rather than polite non-answers when passing

Having been on the other side of a fundraise himself, he now sees how useless polite feedback is

Scope: a change from how he used to operate

45:30 20VC: The Truth About Multi-Stage Firms; Why Portfolio Services are for VCs not Founders | Why Politics is Rife & Decision-Making is Broken in Large VCs | Why Reserves are Bad for Founders & How Boutique Firms Will Win with Mark Goldberg @ Chemistry

Harry Stebbings · published Jun 20, 2026

Investors should give founders the honest personal reason for passing rather than a false market excuse, even if it is rude

Honest feedback like 'you didn't tell a compelling story' is actionable and lets the founder improve; founders who resent it are not the best founders anyway

Scope: accepts it makes some founders secretly hate him

51:05 20VC: Why Remote Work is White Collar Fraud | Why Revenge and Patriotism are the Best Founder Traits | Two Questions Every Founder Needs to Ask | The Wild Story of Raising $1BN from Masa Son in an Hour Long Meeting with Ryan Peterson, Founder @ Flexport

Hussein Kanji · published Jan 20, 2025

There is no upside in arguing with the outside world; investors should reserve the arguing for their own portfolio founders

Your founders are family and you're along for the ride with them; with everyone else the argument gains you nothing

33:54 No upside in arguing with outsiders save candor for your own portfolio founders

Mitchell Green · published Mar 28, 2025

You should always give the reason for a rejection and not fear pushback; a candidate who rejects your rejection with substantive reasoning is worth reconsidering

99.9% of rejected people are never heard from again, so the one who comes back with reasoning and relevant company ideas is showing exactly the quality you want

74:50 Give honest rejection reasons and reconsider those who push back with substance

Kevin Hartz · published Jul 22, 2024

The right approach to passing is constructive redirection followed by being curt, because over-explaining a pass turns into endless back-and-forth

There are always good things to say, like suggesting complementary expertise or a co-founder, but too much explanation consumes time that is short

32:09 Constructive redirection followed by curtness avoids endless back and forth when passing

Paul Graham · published Aug 2008

Founders should evaluate investors' stated reasons for rejection themselves rather than deferring to them, since the founder is the domain expert.

Investors' reasons may point at real fixable problems, but they may also be wrong; the founder knows the domain.

source Founders should independently evaluate rejection reasons using their own domain expertise rather than deferring

Paul Graham · published Aug 2013

Founders should ask rejecting investors for their reasons, framing the request as seeking to learn about weaknesses rather than disputing the decision.

Investors don't always volunteer detail, and you need to know if there is some real weakness in your plans; you won't always get a real reason but should try.

source Founders should ask for rejection reasons framed as learning about weaknesses not disputing the decision

Paul Graham · published Apr 2007

Many investors reject startups in deniable language that founders unfamiliar with the world won't recognize as a rejection; the only reliable test of a yes is whether you are holding a termsheet.

Because they invest in fast-changing things they don't understand, investors phrase rejections so they can later be claimed not to have been rejections; "we want to keep in close touch" or "see some traction" just means you're still at square one.

source Investors phrase rejections deniably so a signed termsheet is the only reliable signal of a yes