One reader wrote:

It'd be nice if they'd just say no and cut that company loose instead of giving them false hope they might get funded if the investor can be convinced. I see a lot of wasted time by companies spent in this murky area - time they might be better off running and improving their companies.

Some VCs are genuinely bad at responding to entrepreneurs. However, even highly responsive VCs sometimes have companies that fall into the no-man’s land between being given a ‘yes’ or a ‘no’.

VCs understand that this murky area is undesirable for entrepreneurs. They don’t avoid being decisive to punish entrepreneurs. Rather, VCs do this because it’s their best option.

Making investments in early stage companies is a difficult task. VCs not only need to see the vision of the entrepreneurs, but they also need to evaluate the potential of each strategy and team. Most of the time it’s relatively obvious to a VC whether or not they are interested in a company. However, there are always some companies that meet a VC’s criteria, but still leave the VC with a few hesitations.

VCs don’t want to walk away from these opportunities, since they know that new information in the future could get them interested in making a decision. However, they’re not ready to invest based on what they currently know. As a result, VCs will ‘monitor’ these companies with the hope that they are given a reason to set aside their hesitations.