A number of years ago we were fundraising for betaworks. I can't remember if this was the first or second financing, 2007 or 2008, but we'd been out talking to various financial and strategic investors for a few months explaining the story and model. One of those investors was someone we had previous close relationships with and one who potentially could be strategically relevant and important to our business; we assumed we'd get a warm reception there, which we did. This investor was indeed receptive, but was taking a while getting convinced that our model made sense for them. They didn't say no, but they didn't say yes either. This was frustrating, as it is for anyone raising money, because we couldn't seem to fully interest them over what felt like a long period of pitching. We knew that the betaworks "story" was different, but we were ourselves convinced we could describe it and model it in a way that made sense, and thus we had conviction that this was a rare investment opportunity (which is not to suggest it actually was a "rare investment opportunity" - it may or may not have been - just that we believed that to be true, and more than that we believed it actually to be a truism).
The financing round ultimately came together with a bunch of other investors, as these things do, with a lot of momentum and demand towards the end of this process. In fact, there was more demand than we actually needed or likely wanted. After we had agreed to the outlines and terms and amount of the fundraise, we went to work putting the documents in order and moving to a close, without the investor mentioned above that we couldn't earlier convince. A few days before the close, this investor reached out and said that, yes indeed, they would like to participate, in a material but very small (relatively to the amount of money we were raising) way.
These people were friends; this entity was strategically relevant to things we were doing; the amount was small. But we said no to them. They had plenty of time earlier, they had their chance, it was a hassle for us to now deal with it. No.
On a Sunday afternoon, the next day or so, an old friend of mine called me. He had no stake in this investment whatsoever, but he knew the parties involved. He said to me, in effect, think about this entities money, this investment, another way: if we thought it made sense for us at one point why did it not now, at the end?
At that point, I realized that it was our egos that had rejected this investor, not good business judgement. Ego has to come into play in starting a company, some solid belief that what you are doing is right even though it hasn't been done or other people tell you it's stupid. Ego allows you to face the rejection and the ups and downs. Ego enables you to convince other people to come on board when they have numerous other options. Ego matters.
But ego can also be short sighted, if you allow it only to be a shield for the rejection that inevitably comes, instead of a way to seize opportunity. We decided we wanted to reject the investor, as part of that shield.
The good news is, we reconsidered it later on that Sunday, after I got that call, reevaluated the whole situation, called them up, thanked them for their interest, and they became an investor the next Monday. A good one too, over time. Years later, I am still trying to make sure that I don't again let ego get in the way of a good deal.