Today’s guest poster is Frank Ronchetti, CFO of a local startup in Boulder. His “ask the vc” question became more of an observation and I thought that I would post in its entirety and then comment below. Frank, you have the floor.

Are VCs incompetent or just inconsiderate? Not all venture capitalists mind you, just the ones who solicit your proposal, read your executive summary, or even meet with you, and then you never hear another word from them. What’s up with that?

There is a subset of the VC community that will just go silent at some point and you never hear from them again. I have raised venture funding for a few companies, and I would estimate this number at around 10-20% of all the funds I have approached. The Berkshire Hathaway annual report’s Acquisition Criteria section always contains the quote, "When the phone don’t ring, you’ll know it’s me." But that only applies where someone looking for funding doesn’t do their homework and sends in a proposal that doesn’t meet their criteria.

The problem in the VC community is broader than that. I have seen potential investors go silent:

• After researching their investment criteria and seeing that we may be a good fit.
• After getting an introduction to the fund from a respected referral source.
• After communicating with a partner who said, “This looks interesting. I will look at your executive summary and get back to you.”
• And even after having a conference call or face-to-face meeting to go through our business plan in detail.

If silence always meant rejection, then this wouldn’t be such a problem, other than the fact that I waste my time making multiple calls or sending several e-mails to follow up. But silence doesn’t always mean rejection. I have spent literally weeks trying to get a response from a VC, only to hear, “Thank you for being so persistent. We remain interested, but we’ve been swamped / we just closed our new fund / an investment committee member has been on vacation / etc.” The process has then continued. So you can’t just give up.

My strategy when I get the silent treatment has been to leave a series of three to five messages (depending on the quality of the introduction or level of previous engagement) with the last one politely saying, “This is the last time I’m going to call.” But boy, what a waste of time this is. Entrepreneurs bust their butts and spend dozens of hours writing business plans, arranging investor meetings, and preparing and making presentations. Venture capital fund managers owe them the courtesy and respect of making a two-minute phone call to say, “No thank you.”

Thanks Frank, that is indeed frustrating. So what’s the deal? Here is my take:

I’ve always taken the approach (as does my co-author Brad) that you try to keep communication as efficient and responsive as possible. We regularly say that we will return any email that we get, but also caution that phone calls are much harder to return. I think there are two takeaways from this: first, whomever you are dealing with, try to find out their preferred mode of communication and two; I don’t necessarily think that we represent the norm when it comes to responsiveness.

We also try to say “no” as quickly as possible to deals that we are evaluating in our pipeline that aren’t going to be funded by us. There is no use keeping the entrepreneur on the hook if you aren’t going to fund a deal and we try to come to the “no” decision as quickly as possible.

I agree, Frank, there is a lot of bad communication “mojo” in the venture world. In fact, I see it too. I’ve seen countless times where VCs have been unresponsive to entrepreneurs, other VCs, or even their own portfolio companies.

In fairness, keep in mind that most good VCs are reviewing a massive amount of emails, business plans and proposals, so there are times when one can get buried. Take for instance the situation where one of my companies is in the middle of a sale process, while I’m in fundraising mode and moving into a new office. (That actually happened to me last fall). I’m clearly going to get slower in responses, but this normally affects timing by days, not weeks, as you mentioned above.

Okay, I haven’t answered your question: Are VCs incompetent or just inconsiderate? I think it’s more of the latter than the former, but ineffective communication styles, in my opinion, will eventually affect a VCs returns as reputations do matter in this business.