Entrepreneurs share their investor horror stories
Owner of Sunrise House Buyers TX
For early-stage companies, investors that know something about the space you are entering are best.
Otherwise, you will spend a lot of time ‘educating’ them and they won’t understand a lot about going to market.
Be sure they will be able to either help you raise more money, or put more in themselves.
One and done investors just clutter up your cap table.
Just keep in mind that if there’s a way in which they can get a bigger ROI by screwing you up, they will do it.
So, try to visualize all possible scenarios where this could happen.
If chances in favor of this happening to you, these investors aren’t a good fit for your startup.
Sunrise House Buyer
CEO of VoiceByte
I knew our investor was a bad fit when they started behaving in a way that was the complete opposite to what their original intentions were.
Our investor had a very powerful path for us to grow, hence why we invited them to participate in our round.
But when it came time to start flexing their muscle and help us expand, they just sat on their hands and did nothing at all.
This lack of action was concerning because our technology perfectly dovetailed into their suite of products.
So from here, it was evident that they were not the right fit which was strange when you consider their enthusiasm, cost involved to participate in the deal and more.
CEO of Watchdog Pest Control
When working with others and especially investors it is super important to watch out for red flags and pay attention to them.
Usually, everything should be green, or good to go.
The relationship with your investor is great and there are no problems and never will be problems.
This is rarely the case though at least in my life.
Investors aren’t there to be your friend, they want their money back and more from you.
Be aware of that so you know exactly what position you are in.
Then you must pay attention to red flags that your investor gives off.
If he lies a bit, even in a small way, that’s a flag.
If she gets angry at you, that’s a red flag. If they show up late, that’s a red flag.
Pay attention to these red flags and make decisions based on how many times a red flag has popped up in your interactions.
Watchdog Pest Control
Co-Founder & COO of MarketOrders
When a potential investor started to become rude and patronising towards me I knew they would be a bad fit.
Their actions did not align with my values and their focus was more on how much money they would get for “advising or investing“ in us rather than focusing on building a great business.
They didn’t share my vision for the business and took a short term approach rather than long term view on what we could build together.
We had to turn them down, which was quite hard as at that time we really needed funds to move forward with the business.
We instead decided to go for a crowdfunding campaign and I’ll never regret it as we raised even more funds than we planned to.
VP Marketing + Sales at Boster Biological Technology
Most entrepreneurs think that procuring finance for their startup is a win if they get the money, but it can be disastrous if it’s not from the right people.
As an entrepreneur, I worked with several investors who were a bad fit for my company and knew when they discouraged me from talking to other investors; a reputable investor never acts like it.
They respect you and your company and never attempt to bully you into a commitment to other investors.
These investors set unrealistic goals for our company and put undue pressure on us.
Everyone knows the inside and out of their business better than others.
If the investors expect you to meet goals and get results that you know you aren’t able to achieve within a set duration of time, you should consider the bad fit investors.
Boster Biological Technology
Founder of HyperSphere.AI
It is mistaken to think that only startups founders need to make a good impression to get an investment.
This process works both ways: founders should do the same due diligence on a potential investor that investors do on their startups.
A great fit is an investor, who provides more than money: a person, who believes in the vision of your startup, understands the upcoming issues ahead of the team and has the expertise to help the project succeed.
How to figure out if the investor is a great fit?
Think about the future of your startup – how you see your cooperation with the investor (How much you expect him to be involved, when will be the next round, what kind of connections or expertise you need besides the money, etc).
After that, you need to do the due diligence and review the background of the investor, according to the following factors: term sheet, previous exits, expertise, co-investors.
Did the investor follow the term sheet with the previous startups, did he have exits (how much is he usually involved in the decision making process.
Also, it is important to know the other investors, who already participated in the next round with the potential one – it means that they are very likely to fund your next round too.
These are the important questions to think about the further development of your startup and research the insights about the potential investor before making a decision.
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About the Community
On the podcast, Sean talks with entrepreneurs about the reality of their struggle to succeed, as well as answering questions from the community, and sharing nuggets of wisdom from his own life.
Discover through these amazing episodes the courage to open your mind, heart, and soul to the world so you can be the best entrepreneur possible, respect the people you work with, and improve the world with your company while not hurting others or yourself in the process.
Sean is an entrepreneur, investor, and advisor based in SE Asia for over 12 years. He is passionate about Psychology and helping others improve themselves.