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Feh, just be honest with people. If they get defensive, they get defensive, so what? I'd love to hear you tell me "I just don't think you have what it takes," as that's just going to pour fuel on my fire and motivate me to work that much harder just to spite you. I love negative feedback like that... fuck all ya'll, because when I'm running a billion dollar company and rocking up to your shitty office in my Maserati to ask "how's it going?" I'll be laughing to myself at how pathetic and stupid you were to doubt me. |
What does the other side gain from telling you the truth and burning bridges like this? Best to give a vague, non-committal reason so there's always a chance they can talk with you again in the future.
Investors (to take one example) are fallible and scared. They're driven by fear, and by greed - fear that they might miss out on the next facebook (it'll go on their public record, usually, because of what you're proposing), and greed at the upsides are if they can get in before others on the next facebook.
Notice I didn't say "before anyone else." That's best, but barring that, you want to be able to get in later because you have a good relationship with the founder. And touchy founders that would be vindictive about being rejected are tough to keep a good relationship with, and most entrepreneurs are emotionally heavily invested in their own startup so it's easy to be touchy and vindictive, so it's "best" as an investor to not upset anyone.
"best" is in quotes because this is a trend that might slowly be changing, in large part because of the pressure from groups like YC.