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Why I’ve Turned Down $1 Million Three Times | by Rachel Greenberg | Feb, 2021

A few years ago I received an email out of the blue that really took me by surprise.

I was at least a couple of years into my startup journey (also known as, living in a dingy 400 square foot studio apartment and trying to stretch my savings as long as possible, while attempting to build a business in a vacuum).

These were the early days. We were making money, but we were also spending money — and we were spending more per month (on the business) than we were bringing in. Also known as not being profitable.

However, there was a light at the end of the tunnel: we were just beginning. We were seeing growth, getting positive customer experiences and testimonials, and once we could crack the code on this marketing thing (getting our customer acquisition cost low enough that we would be profitable), we could be off to the races (maybe; I hoped).

By all rational accounts, based on the stage we were in and our goals for further growth and profitability, it would be easy to see why an unsolicited offer of a million dollars — or any amount, really — from a legitimate venture capitalist (or any reputable, knowledgable investor) could be an attractive — heck, maybe even irresistible — proposition.

Here’s the thing: I had thought about raising funding. This wasn’t my first attempted startup, and I had businesses for which I thought raising funding might possibly make sense. I had even gotten about halfway through the Y Combinator application a few times for those respective businesses, but something had always stopped me.

It wasn’t that I was too afraid to fail; that a rejection from Y Combinator would be soul-crushing. I had already worked in finance and had a very costly personal startup failure; there was little you could do to crush my soul at that point.

The reason I hadn’t gone through with the Y Combinator application?

As far as Y Combinator goes, I wasn’t sure they were the right businesses for it…As for this one? I didn’t want this to be the startup to hang my hat on for such a prestigious accelerator. I thought I might one day down the line have something better; something more promising; something for which I would actually need funding. I didn’t want to blow my chance or waste my connections now.

But still, when someone offers you a million dollars just like that, it’s a lot harder to turn down than an application for an accelerator you may or may not get into.

They didn’t actually ask about profitability, initially — which was interesting, and probably a good thing.

  • I knew how crowded of a space we were in.
  • I knew the incredibly high customer acquisition cost most common and accepted among the majority of larger players.
  • I knew that as this industry got more crowded, and large advertising platforms (which were the hub of lead generation and sales in this market) tightened up their guidelines and imposed ghastly restrictions, marketing opportunities would become more and more limited; they already were.
  • I knew that the refund and failed payment rate in this industry was, on average, north of 30% and even heading towards 40%. And I knew it wasn’t getting any better.

So, of course, having that insider’s perspective on my industry, my company, and the challenges that would befall us (and had already begun to), I did have a more pessimistic view than an eager investor might, especially one excited by the seemingly huge growth potential and the confidence that funding would be the surefire solution to any marketing woes and would put us on the path to unquestionable success.

I wasn’t so sure.

And my lack of confidence in that investor’s intricate understanding of the (many and grave) obstacles we faced, along with the increasing challenges to our industry as a whole, were concerning to me.

Want an example of a grave obstacle?

Some of our biggest peers and competitors had been shut out of certain advertising platforms indefinitely. With no warning. And that was their bread and butter. Some of them made over 96% of their sales from those very platforms that were now cracking down on our industry.

By the way, that happened to my company as well. Just when we began experiencing an encouraging uptick in sales, heading towards profitability at an increasingly accelerated pace; bam. Cut off.

Luckily, we found some workarounds, but it wasn’t easy and it wasn’t cheap. In fact, those workarounds alone would more than triple our monthly operating costs, just to maintain some semblance of a digital presence and continue with our marketing efforts (in the few places our customers had proven themselves willing, frequent buyers).

That was the other problem:

There seemed to be one type of marketing and sales strategy that worked in this industry. While it worked well, it was getting heavily saturated, and the more this strategy became overused by big and small companies alike, the more its returns diminished.

In other words, yes, our company was growing. Yes, we had potential. But no, it hadn’t been easy, and it was likely proving to be even more difficult going forward…and shrinking margins and limited marketing opportunities seemed to be the dominant, increasing, and accepted theme in our industry.

Suffice it to say, I had my concerns.

I once heard from someone — I think it was a professor in business school, or else possibly in a book I read about startups and venture capital — that venture capitalists rarely say no, entirely.

They rarely close a door for good, but rather punt those not-quite-yet-investible ideas down the road.

In case, one day, they do grow to be something worth investing in. The investors don’t want to burn their bridge entirely — or publicly make a premature, definitive, and completely wrong call, with regards to the potential or likely success of an early-stage startup.

So they don’t say “no”. They say “not now”.

And that’s exactly what I did. I wasn’t 100% sure that taking on venture capital was a bad idea, but I also wasn’t very confident that this particular investor was right for this particular business…or even that this business had the type of future success story a real venture capitalist would be looking for.

And I figured, when it comes to entering the world of venture capital, you only have so many shots. I didn’t want to waste mine on this; at least not now.

So, I thanked him for his offer and told him we weren’t seeking out funding at this time, but if he was still interested, he could check back with us in the next four to six months.

Screenshots of my email from and to the inquiring venture capital partner. The investor’s name, his email, his VC firm, along with my company email have all been blurred out for privacy and confidentiality. The edited version (with the personal details redacted) was created in Canva.

And I expected that would be the end of it. I mean, I had pretty much just turned down a very generous million-dollar offer, even though I barely had a leg to stand on (definitely not a profitable one), so what chance was there this now rejected investor would come back to me with another offer in the next four to six months…or ever?

But guess what?

He did. I can’t recall the exact spacing of the second offer; it could have been as few as four months later or maybe as many as eight. Either way, his offer still stood. Still a million dollars. We could talk about equity, valuation, and how involved of both an investor and strategic partner he and his VC firm would be. They liked to be involved, so he told me.

Unfortunately, at that time, my confidence in this business had really started to dwindle. Not because success and profitability weren’t possible, but just because all those issues that had started threatening our industry only became more pervasive and more detrimental to our sales, growth, and more importantly, longevity.

What was the use in taking on venture capital if our industry would be kaput in a year’s time?

So, again, I punted. I again thanked him for the offer and told him we might be in a better place to take on investment in another four to six months.

And believe it or not, he actually came back. This might have been six months later; it might have been a year. I don’t really remember.

His offer was flexible. His offer was generous. And his offer revealed what I feared from the beginning: this investor did not fully understand this industry or the challenges we were up against.

Our biggest problem wasn’t a maxed out marketing budget. The real issues we faced were much bigger, and they pointed me more towards the idea that we needed a total “reframe”.

We needed to walk things back to square one before deciding to commit a million dollars (or any greater amount of money) towards marketing or other growth-generating pursuits. At least for this product.

Some competitors had already bowed out. Many began pivoting. It definitely wasn’t a good time to keep doing what we were doing; we knew at least that much.

While I wasn’t confident in our business or the future of our industry, that didn’t shake my confidence as a founder. I had proven a concept; I had successfully gotten sales. I had figured out what it took to successfully market a product like this, but forces outside of my (and most of my competitors’) control were closing in on us and dimming the light at the end of that tunnel.

Anyhow, that deep concern and insecurity about the future of our business led me to explore other tangentially related opportunities. Other ideas. Other startups. Similar, but different.

In fact, I was already working on two by the time this investor came around with his third (and so far, final) offer of a million dollars.

Yes, I could have pitched him those other things I was working on. Sure, I could have told him my concerns about the primary business and asked for his suggestions to overcome those obstacles. Heck, I could have just said f*** it, and taken the million dollars to see where we could go with that initial business in the troubled industry.

But I didn’t do any of those things. And even though I turned down the million dollars all three times, I don’t regret it. I think, knowing what I know (which he clearly doesn’t, in regards to that business, that industry, and that offer), I don’t think it would have been a great outcome for either of us.

Vinod Khosla of Khosla Ventures (a venture capital firm), got candid about how much most VCs really help the companies they invest in:

“Maybe some percentage that’s substantially larger than 95 percent of VCs add zero value. I would bet that 70–80 percent add negative value to a startup in their advising.” — Vinod Khosla

If you thought raising venture capital was the panacea, maybe think again…

Success in business and startups isn’t sprinting to the pitch, bagging the funding, and thinking you’re home free. Fundraising is not the end, it’s the beginning. It’s not the mark of success, it’s the burden to ensure the eventual success will be tenfold your initial aspirations.

You only get so many opportunities in your lifetime, and I wanted to make sure I took advantage of the ones that most aligned with my short-term and long-term goals.

Short-term:

A million dollars and a venture capital partner as a strategic advisor might be nice.

Long-term:

That all depended. It depended on the alignment of our vision for the company. It depended on actually achieving the milestones set for us. It depended on the overall outlook and trajectory of our industry as a whole. It depended on us reviving the troubled industry, finding a new way or place to build audiences and generate sales, and overcoming the obstacles those larger industry incumbents felt they couldn’t. It also depended on me deciding that this business was going to be it: my baby. My one primary project and the thing to which I would dedicate 150% of my time.

If I took on that $1 Million and VC partnership, I would also have to resign myself to focus wholly (and solely) on this business. Other startup ideas? Backburner. Maybe in a few years when this one is successful (or fails, and we part ways with our VC partner, or worse, make headlines akin to Quirky or Homejoy, revealing the fact that well-funded startups are not immune to failure), then perhaps I could revisit some of these other ideas.

And that last piece was my biggest problem.

I wasn’t sure enough that this business was going to be “the one” to dedicate myself to committing 100% of my time and efforts to it. I just had an inkling I might have something better up my sleeve. And I definitely didn’t want to have to make that call now, even (or especially) in exchange for $1 Million in venture capital…with many strings attached. Trust me — there are always strings attached.

Along with a few things for you to consider before accepting venture capital (or any other type of startup funding):

  1. It’s not a million dollars to me or you (it’s to the business). If you think venture capital is some big payday or “get rich quick” opportunity, it’s pretty much the opposite. This is a million dollars (or however much you’re offered) that you’re being entrusted to generate an outsized ROI for your company and, just as (or more?) importantly, the venture capitalist. The investor, who now owns a part of your company, likely has a whole group of other investors’ money pooled (that’s kind of what a VC firm does). He’s banking on a big enough return — like a “hit it out of the park” unicorn situation, with a liquidity event (like an acquisition or an IPO), to deliver both those high net worth individuals (whose money he pooled) and his VC firm a healthy return, many times over their initial investment.
  2. Along the lines of number one, I didn’t need the funding. Funding wasn’t our biggest problem, and we had prepared to bootstrap up to a certain threshold and still had significant runway. So, if we didn’t need the money, what else was in it for us? The strategic partner? Perhaps, if he actually knew and understood the industry or the challenges we were up against…
  3. I didn’t necessarily want to open up my business to investors or strategic partners at that time; we were still very early and still figuring things out. That said, the right investor could have made sense…but this likely wasn’t that person.
  4. More money could actually make things worse. How? By distracting us from the real obstacles that threatened our long-term success. More money might just be more security and comfort to throw various marketing techniques at the wall to see what sticks. But if we couldn’t make it work on my own $100k of bootstrapped funding, does that really mean a million-dollar marketing budget would be the answer to flip the script? Maybe, but I wasn’t convinced.
  5. This was a big one for me: I wasn’t convinced this would be my primary company. I had a few other things in the works, and my commitment to and vision for this particular one very well may not have aligned with this investor’s long-term goals.
  6. If we failed, it would be a much more public failure and could possibly harm or preclude my future fundraising opportunities for some of those other earlier stage companies and ideas in the works. If I only had one shot to raise venture capital, this would not be the company for which I wanted to do it. Given that the world of startups and venture capital can be pretty small, I didn’t want to hang my hat on this one opportunity, this one company, or this one chance at raising capital. What if one of my other, potentially better (or with better, larger, long-term growth potential) companies actually needed funding? And I had already used up my one fundraising card on one I wasn’t quite sure about and for which I didn’t need capital. There could be a company of mine later on for which funding would be truly vital; this wasn’t it.

Simply put, we didn’t need the money. Money wasn’t our biggest problem. This was probably not the best (or most informed, or potentially helpful) investor for us. And most importantly, I didn’t want this to be my one shot. I had something better in me; I just knew it. And I’d rather forego a million dollars today than preclude my pursuits of those other promising ideas.

So, should you raise funding or consider the next million-dollar offer that pops up in your inbox? Maybe.

  • Do you need the money? Is money even your problem, or a viable solution to fix whatever is your problem or limiting factor?
  • Is this investor a good fit? Do they understand the industry? Will they offer up strategic advice, helpful partnership connections, or anything else aside from just money?
  • Is this the VC-worthy idea you want to hang your hat on?
  • Is now the right time? Venture capital (or some form of fundraising) will probably always be there down the line, in some form or another. Once you sign that contract and get in bed with an investor, it’s a lot harder to change your mind and back out…
  • What would happen if you don’t take the money now? Where would you be in 6 months, 1 year, 5 years, and so on?
  • Do you want to be beholden to someone other than yourself? Your investor is kind of like your boss. Do you want to have an equity-owning boss who holds the purse strings to your company’s success (and possibly weighs in on every critical decision along the way)?

Listen, I’m not against fundraising or venture capital. In fact, I could see myself raising funds for another startup of mine in the future.

For the right startup. From the right investor. At the right time.

This just wasn’t it.

P.S. In case your wondering, yes, one of those other ideas did prove more promising…to the tune of a 200x ROI within a few months…And still, we didn’t take a dime of venture capital funding (to date).


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