Posted by SevenTimer on 2007-07-14
Tags: Preparation Targets
When you are in the thick of fundraising, you'll likely get put into a position where it is tempting to compromise and accept a term sheet from a less-than-desirable fund or a fund that you have some hesitations with. Hey, you just want to get back to running the business. Maybe the fund makes an attractive offer. Maybe you are burnt out on fundraising. Maybe you need the money. I strongly recommend, from experience: don't compromise on your investor selection.
If you leave a meeting thinking, "what a waste of time," think about having these people waste more of your time as an investor. The questions and insights don't get any better over time, even with domain knowledge. If your gut is telling you that the investor is not that smart, conceited, mean, or devious, they probably are. They will continue these traits when they are on your Board, too. It's not like they switch from "mean pitch mode" to "happy investor mode." The tricky situations are when someone does have their "game face" on in a pitch, so you definitely should do as much research as possible.
I am on my 7th start-up, and I have had a lot of investors. Some are and were horrible. Others are and were great. The one thing that is evident to me now is that, with the exception of one person, the quality of the investor or Board Member is obvious very early on. More importantly, it certainly does not get better, but it may get worse. So, again, don't compromise.PRIVATE: Members Only