There are several conversations currently on what VCs could do better in our relationships with future and current founders. Brad Feld posted about an entrepreneur’s frustration with a VC’s conflicting actions before, and then during, fundraising. Bijan Sabet challenged that there be reform in the VC community as a whole.

As an investor, I get to say “yes” to a variety of exciting opportunities, but I can’t say “yes” to everything. In fact, “no” is the most frequent and likely the most important word I use. There are a variety of ways to say “no” and I believe there are a number of ways VCs can be better at it.

1. Define Your Firm

One way we do this at Avalon Ventures is by defining our firm and what early stage investing means to us. Avalon Ventures is a seed and early stage technology-focused venture fund with an emphasis on information technology and life sciences. While there is no one-size-fits-all definition of what “early stage” entails, it means we are either the catalyst for starting a company, or the first, and often only, institutional investor. If a prospective company is solving a real problem, has a great team, but are not in our industry or are farther along than we invest in, we have a great opportunity that we should connect to the right hands.

2. Be Transparent

There are many reasons why we may decline an investment, and most of them have very little to do with the quality of the opportunity and team.  We may be late in a fund cycle, feel we have enough exposure in a given area, deem the opportunity as competitive or too close to an existing investment, or simply be short on bandwidth at the moment. Some VC’s take meetings for the purpose of educating themselves about a market, or to conduct due diligence on a competitive opportunity.  I don’t like this and believe we need to be honest with ourselves and the entrepreneurs. If we we have an genuine interest in a space or company then fine, but we should not take a meeting if we know beforehand we have no intention of investing.

3. Be Constructive

Saying “no” in a constructive way is good for the VC, the company and the startup ecosystem.  Building relational currency is another way VCs can show support for an idea or company and avoid burning a bridge. Whenever possible try to add something of value to the company.  For example, this might include introductions to other investors, partners, customers or offering constructive feedback on the plan. Market disruption is an uphill battle that VCs and Entrepreneurs fight together. When we come across people doing the same hard work in a different camp, we need to encourage and connect them. Doing so benefits startup culture as a whole.

4. Actually Say No

When a startup is not a fit for you, or another firm you’re acquainted with, it is important to actually say “no.” Doing so shows respect for the company and allows them to continue their search for the right partnership. Mark Suster, VC and two-time entrepreneur, recommends writing a personal response, but streamlining the way you talk about opportunities you cannot take advantage of. This ensures that you respond in a timely manner, allowing that opportunity to find someone who can be involved. Saying “no” is part of our job and responsibility as a VC, and it makes the opportunities we say “yes” to all the more exciting. I cannot help but agree that VCs need to be better at saying “no.” Making an effort to be better at closing the loop prevents ruining a relationship and your reputation as a VC.

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