VC Joakim Achren: “Twenty reasons why I said NO to startup founders”

VC Joakim Achrén helps founders build successful games companies. He’s investing in games through F4 Fund which he started in 2023, together with with David Kaye. To follow his work, subscribe to Elite Game Developers.

In early 2023, Joakim Achrén released a free eBook titled “It’s a Pass” in which he shared the most common reasons that he’d said no to founders who’d pitched him. We published an article about that called: The valuable lessons of rejection. That was in the time Achrén was still an angel investor. Now he’s been a full-time VC for two years, and it’s time to update his list of reasons to say no.

Here’s a list of updated twenty reasons why I’ve said no to startup founders in the past two years. I will share the pass note, which basically is a paragraph of text that shows why I’m passing on the investment.

Market Concerns

1. Insufficient Market Size: “I struggle to see your approach as a massive opportunity to build a billion-dollar company. I think you can make this a really nice business, but getting to venture returns doesn’t feel like something you can achieve.”

This is probably to most common reason to say no. Especially first time founders have a hard time understanding the dynamics of the venture capital financing model, which truly requires startups to use the investment to growth the company rapidly, and then raise again another round of financing in 12-24 months, to go to the next level. VC really doesn’t work for companies that raise once and then become a nice business, hovering maybe at $5M-$10M in revenue annual, which is awesome for the founders, but not for VC because they ofter need bigger exit potential in order to return their fund with each possible investment.

2. Lack of Market Differentiation: “Unfortunately, we’ll have to pass. I’m having trouble seeing how the differentiation you’ve outlined forms a strong thesis for breaking into the market.”

I was recently talking to a new mobile ad network, that had a great team, very talented group of people. But they really didn’t bring much new as their offering; nothing that could make them a contender to Unity and Applovin.

3. Multiple Verticals Without Focus: “The platform’s current focus on multiple verticals (gaming, bikes, luxury goods) makes it challenging for us to see how the business can develop the depth needed to become a category leader with so many branches.”

One of the key lessons for me from twenty years in startups is that focus is critical. Small teams can’t do many things at once. You might have a few people who can make magical products, your best people, and you want them to focus on several products at once. Or you have one service, which you feel can work for several industries. It’s better to focus on one vertical and dominate that vertical. Once that has been done, expand.

Team Issues

4. Solo Founder Risk: “The solo founder risk is real in your case.”

Investors typically prefer startups with multiple founders rather than solo entrepreneurs. This preference stems from practical considerations: founding teams can distribute the burdens of building a company, contribute diverse perspectives, and provide mutual support during challenging times.

In my experience, solo founders often struggle when facing obstacles: decision paralysis, difficulty pivoting, and burnout are common issues. Another problem is with imbalanced founding teams, with one driving entrepreneur surrounded by less committed co-founders face their own challenges.

The ideal scenario involves at least two equally committed co-founders who complement each other’s skills while sharing the same entrepreneurial drive. This co-founder team creates resilience, enables better decision-making, and maintains momentum when inevitably facing setbacks.

5. Inexperienced Founders: “First time founder… New to gaming: how to build high functioning teams, what roles are needed, etc.”

For me, founding teams without domain expertise raise concerns, particularly in established markets. New teams can do well in brand new markets by figuring things out along the way. But when you’re trying to improve on what already exists in established markets, you really need to know that industry inside and out. Teams entering competitive spaces, like the games industry, without specialized knowledge face steeper challenges and may struggle to differentiate their offerings in meaningful ways.

6. Founder-Market Fit: “I like your idea, but I’m not seeing what makes it different from what’s already out there. Also, dating apps are really tough to get off the ground. Getting users and standing out from competitors is super hard in this space. Have you thought about how you’ll handle these challenges?”

Many founders dive into new markets with plenty of enthusiasm but without fully grasping the real challenges involved. Some might be excellent technical talents or product builders, but they haven’t thought through how to reach customers and gain users.

What I’ve noticed is that the most successful teams aren’t just focused on building something great, but they are genuinely curious about mastering go-to-market. It’s usually this kind of curiosity, rather than product excellence, that separates winners from the rest.

Traction & Validation

7. Insufficient Traction: “This is interesting, but there’s still is no revenue or users. In my opinion, there’s not enough proof that this is ready for a seed raise.”

We often see companies that got pre-seed funding a few years ago and are now looking for the seed round. The problem is, they still have no users or revenue, so the basic risks haven’t changed. Yet they’re asking for a valuation three times higher than before. For someone like me coming in as a new investor, it’s tough to justify paying that premium when nothing meaningful has happened to make the business worth three times more than at the previous round.

8. No Revenue Despite Users: “You have a few thousand daily actives but no revenue, plus valuation is $12m.”

You might have users, but you’re still missing revenue, which is something we’d expect to see by this stage to justify our investment. If you can’t show revenue yet, you could focus on other impressive numbers instead, like really strong engagement stats: how often people use your product and how long they stay. What we’re looking for is evidence that you’re on the verge of something big. Show us why your company is worth the new money we’d put in.

9. Adoption Uncertainty: “Adoption and traction risks are too immense.”

We’ve recently spent time with several startups that are building dating apps. Many of them have interesting differentiation angles and have already started to on-board users who are getting matched and are going on dates. But the sector is a true red ocean: incumbents have been trying all sorts of differentiating features and there is a long-tail of dating apps in the App Store that never got anywhere. Making investments into these kind of spaces, when user adoption is uncertain and metrics are unreliable because of low volume, is often too risky.

The Business

10. Questionable Scalability: “I’m not fully convinced that your approach is the right one in such a competitive space, especially with so many startups focusing on similar solutions with mobile apps.”

Even though a product might serve a niche clearly, and there might be thousands of paying users already, it’s often hard to tell how big this can become if the users aren’t growing at a rapid pace. In these cases, what we’re looking for is proof that their solution can attract mainstream users, not just early adopters who are already passionate about this problem.

11. Unclear Go-To-Market Strategy: “Unfortunately, we felt that your GTM plans are very unclear.”

When founders don’t have a clear plan for marketing, finding customers, or understanding their sales process, it’s a big red flag. You’ve got to show which customers you’re targeting, how you’ll reach them, what it will cost, and preferably, how many will convert to paying customers.

A weak GTM strategy makes investors think you might build something cool but never get enough customers, no matter how good your product is. I need to feel confident that you’ve figured out not just how to build something, but how to sell it and grow your business.

12. Founder not being a learning machine: “Thanks for reaching out to us, but it’s unfortunately a pass. It just feels like the opportunity you are going after is very challenging and we just couldn’t become convinced that you are the right team to go after this opportunity.”

We invest in learning machines. People who are sponges for knowledge. Super curious founders. It’s simply the best approach, because startups are full of ups and downs, but also lefts and rights, with constant experiments that fail alongside promising ideas that need time to mature before they finally deliver results. We bet on people who can read the signals and collect insights from everywhere, advisors, teammates, market trends, and then adapt quickly. These continuous learners consistently perform better when navigating the unpredictable startup journey.

Competitive Landscape

13. Oversaturated Market: “This genre is extremely competitive and we aren’t comfortable in placing a bet here.”

I’m still seeing tons of mobile game pitches for Match-3 games with some small twist. Sure, you might have a great team, but does your pitch really explain how you’ll beat the big players and win in this market? You need to show me how you’ll handle these challenges.

14. Emerging Competitive Markets: “AI agents space is getting super competitive and these guys don’t have anything special to make a big business.”

If I had invested in Finnish mobile games companies back in the 2010s as an angel investor, I would have made a lot of money. But I would have done even better if I had known which companies had real advantages over others. As an angel investor, you want to get in early, so I would have just bet on people who knew how to make good mobile games.

It’s similar with AI today. You probably want to bet on people who really know the industry they’re building for, or who are very good at the technical side of AI and machine learning. This gives them an edge. When it’s just some random startup making AI agents, they’ll likely face a lot of problems, as did those Finnish mobile game companies founded in the 2010s that never got anywhere.

15. No competition: “It does feel like many people have tried to do something like this before and there’s a bunch of dead bodies in your sector.”

When founders say “we have no competition,” it actually raises a red flag. Either they haven’t done proper research, or worse, many others have tried and failed in this space. A graveyard of failed startups in the sector usually means there are fundamental challenges that aren’t obvious at first glance. Maybe UA costs are too high, or users aren’t willing to switch to new products, or not enough users are interested in these products.

In these situations, I really want to know what the founder has learned from the “dead bodies” and how they’ll avoid the same fate. If they can’t clearly explain why their approach will succeed where others failed, it suggests they might be headed for the same outcome.

Valuation & Funding

16. Excessive Valuation: “The valuation is too high for a company that doesn’t have a product launched.”

Sometimes the problem is just an extremely high valuation. Maybe someone already said yes to give the company a term sheet at a $35M valuation. Maybe it’s a big fund that needs to invest bigly, or they are setting a high valuation in order to out-compete the other big funds. It also creates a problem where the company will need to meet this massive valuation by scaling the company quickly to be worth over $100M in just a few years.

17. Insufficient Runway: “We’re uncomfortable with the round falling so far short of the original target, which reduces your runway a lot and really amps up our risk.”

Many times a startup has set their sights on raising a certain amount, but because of a lack of investor appetite for the startup, they’ve decided to only raise half the amount and build from there with a smaller budget. Sometimes this can be a good option, but often not: the startup ends up in a position where they won’t have enough time to prove a product, before they end up running out of runway.

Technical & Product Issues

18. Technical Debt: “After our technical DD, we discovered that the game has a lot of tech debt, and it’s hard to add new things.”

One of the hardest yet often overlooked reasons to pass on an investment is when a product has been operating for years but carries heavy technical debt. This hidden burden can severely limit a product’s ability to scale. I’ve witnessed this repeatedly in gaming, where promising titles stall because their foundation was built with rushed, short-term coding decisions.

When developers can’t efficiently modify or build upon the existing code, even a game with great potential gets trapped by its own architecture. What looks like a product growth problem is often actually rooted in technical limitations that require extensive rebuilding to overcome, and founders might be reluctant to share such challenges with investors up front.

19. Product-Market Fit Uncertainty: “Not enough data on PMF for PC gaming audience wanting to gamble.”

Many times we get pitches where a startup is introducing something new to an existing audience, e.g. gambling for PC gamers, or community app for people in their forties. Often in these situations, the proof of such a need needs to be shown, and it needs to prove that the need is massive. Often, especially in consumer products, the need is hard to read, and early metrics can be misleading. What looks like initial traction might just be curiosity from early adopters rather than sustainable demand.

Investor Fit

20. Not being able to evaluate the opportunity: “Despite learning more about the space, I don’t feel I’ve developed the depth of market understanding needed to evaluate the opportunity.”

Sometimes the smartest thing an investor can do is pass on a deal they don’t fully understand. When looking at startups in complex or specialized markets, investors need to know the industry well to make good decisions. If a VC doesn’t really get how a particular market works, who the competitors are, or the technical details, they can’t properly judge if a startup will succeed.

Also, the best investors do more than just write checks: they help with advice, connections, and industry knowledge. When an investor doesn’t know much about the field, they can’t help the founder navigate the challenges specific to the industry. It works better for everyone when investors stick to areas where they can truly help founders beyond just providing money.