Don’t be afraid to reject if you want to be successful in technology scouting
A couple of technology scouts (investors and R&D managers) confessed to me that they often feel reluctant to reject companies. Their inability to reject was either driven by fear of ‘just not getting it yet’ or an emotional attachment to a target company. Both hesitations to reject can prevent you from being successful in investing or partnering. The first makes you an indecisive decision maker, the second a weak one. The solution in both cases is quite straightforward though: increase the volume of opportunities.
One inspiring example on the topic of rejecting successful companies is Bessemer Ventures, a highly successful VC firm in Silicon Valley.
Where others would hide in shame, Bessemer posts its ‘Anti-portfolio’ on its website, including all companies it once declined, but that became spectacularly successful afterwards (AirBnB, Facebook and Google, amongst many other big names, ouch!). That Bessemer became extremely successful despite these misses was only possible by the sheer volume of leads they were able to choose from. Typically, investors like Bessemer screen thousands and speak to hundreds of companies on a yearly basis to generate such a flow of opportunities. As such, they can afford to miss a few.
Creating a high volume of investment opportunities can also prevent you from becoming too emotionally attached to a target company during transaction process. Such attachment can lead to a lack of objectivity, for example in case you find ‘skeletons’ or red flags during your due diligence process. Such skeletons should always make you extra cautious and you should always consider walking away from the deal as even clean deals have more than enough potential for issues later on!
This sounds – and maybe is – obvious, but without alternative opportunities in sight, such a call is far more difficult to make. The pressure to close deals is typically high (especially for investors) and declining that deal you have been working on for three months, typically negatively affects your short term KPI’s.
Being confident on finding hot leads frequently, is the only way to stay objective and make the rational decision to walk away when you should. In turn, finding sufficient hot leads can only be done by assessing many companies every month.