Finance & Investing

How To: Reject Pitches Like a Venture Capitalist

Sometimes you need to make a quick decision and move on. A “fast rejection mindset” helps.

May 03, 2024

| by Dave Gilson
A still from Shark Tank. From left: Chris Sacca, Kevin O'Leary, Lori Greiner, Robert Herjavec

To see this approach in action, look no further than ‘Shark Tank.’ | Getty Images/Adam Rose

Venture capitalists are deluged with hundreds, even thousands, of pitches. So how do they pick great deals out of the pile? For a start, they get very good at saying no. They know exactly what will cause them to reject an idea without hesitation and move on without regret.

As Stanford Graduate School of Business finance professor Ilya Strebulaev and Alex Dang, MS ’14, explain in their new book The Venture Mindset: How to Make Smarter Bets and Achieve Extraordinary Growth, “‘Reject’ is a keyword and a distinct feature of the VC mindset, for VCs start by looking not for a compelling reason to invest, but for a way out.”

That might seem counterintuitive — aren’t VCs laser-focused on finding promising ideas? Yes, and that’s why they know the red flags and critical flaws they’re looking for. Early in their selection process, they quickly screen ideas and clear out any that don’t click. That gives them more time to spend with ideas they’re really interested in.

“Sometimes it’s better to speed up the decision process and find efficient ways to say no early so that you can evaluate more ideas rapidly,” Strebulaev and Dang write.

To see this approach in action, look no further than Shark Tank. Watching the show closely, Strebulaev and Dang observed that the “sharks” fire questions at the contestants until the moment they hear something that scares them off. “If you analyze their responses carefully, you realize that when each one identifies a factor that they believe to be a ‘critical flaw,’ they immediately lose interest.”

Not sure how you’d adopt a “fast rejection mindset”? You’ve probably already used it when confronted with too many options. As Strebulaev and Dang note, we’re pretty good at making snappy choices when scrolling through restaurant reviews or scanning shopping sites. With practice, you can learn to apply this mindset to situations with bigger risks and bigger potential payoffs.

“Being selective and systematically rejecting most of the opportunities that come your way is not a privilege limited to venture investors,” they write, “but a skill that anyone can master.”

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