“You’re too early”
Nearly every single VC that doesn’t invest in your company — or about 90%+ of the VCs you speak with — will use the same excuse. You’re too early, come back next round. What does this mean? Are you actually too early?
Probably not. Sometimes investors are a later stage investor and you truly are too early, but you can discern that fairly easily — just read a fund’s website and you’ll be able to tell what type of deals they do. Typically investors have a strike zone, but bend their own rules quite frequently. So what you’re being told is — we’re not willing to bend our rules for you.
Being “too early” is all about risk. If you’re talking to a true seed investor, maybe there’s too much product risk — you haven’t proven the ability to get a valuable, functional product in the market. For slightly later investors, you haven’t proven out customer demand yet. Customer demand is more a qualitative measure than a quantitative one: you know it when you see it, there’s no real number of customers you need to validate that your product hits a real need. For even later stage investors, it’s often about a revenue threshold that you haven’t yet hit.
But you’ve seen that same investor do a deal that’s even earlier than you are. So you know you’re not actually too early. For sure, investors bend their rules for a variety of reasons: they love a market, they love a founder, etc etc. But they still have a wheelhouse, and 80% of their deals are going to fall there.
So what can you do if you’re “too early:”
1) Re-evaluate the investors you’re targeting.
2) Be less early — figure out what milestones you can hit quickly (sales, customers, product, users, etc) and leveraging the assets you have to show progress in the company and validate your likelihood to succeed.
3) Stop fundraising — find a way to continue the business without raising money.
The only mistake entrepreneurs make in this situation is to fail to recognize a pattern. If the data points all indicate that you’re truly “too early” to be in the wheelhouse of your target set of investors, don’t count on one of them making an exception when the rest won’t, and don’t claim that the investors “don’t know what they’re talking about.” One or two may be clueless — five means it’s just not the right fit.
Just like businesses need to pivot, fundraising strategies need to pivot — and consistently hearing “you’re too early” may not be overly descriptive as to what you need to fix, but it tells you that you’re not targeting the right investors at the right time with the right traction.