Don’t assume that all investors are the same, just because their money is always the same color. Every entrepreneur should do the same due diligence on a potential investor that smart investors do on their startups. Check on their track records, values and management style. Taking on an investor is a long-term relationship, like getting married, that has to work at every level.
Let’s just say that every investor is different, without trying to define what is good or bad for you and your startup. Investors are human and subject to human tendencies, whether they are your rich uncle, an angel investor with personal funds or a venture capital investor with institutional money. Here is a summary of some key investor stereotypes that generally need to be avoided:
-
Investment sharks. I’m not talking about the Shark Tank TV show, but some might say the panel fits the definition. While the majority of investors are looking for a win-win deal, there are investors who like to prey on entrepreneurs who have little financial experience, don’t read the term sheet or are simply desperate for a deal. Seek out advisors to help you avoid these investors.
-
Investors who love to litigate. We all know that startups don’t have money to fight in court, so it’s easy for a few unscrupulous investors to jump to the conclusion that intimidation and lawsuit threats can improve their returns and control after the money changes hands. Here is where checking the track record pays off. Don’t assume you will be the exception.
-
Imperial investors. These are investors with such massive egos that they expect to dictate both the terms of the investment as well as all future strategic decisions of your startup. Unless you are preparing to work for Donald Trump someday, I recommend that you skip this investor in favor of a more equal partner.
-
Legal eagle investors. Negotiating terms is normal before the investment, but once the check is cashed, you don’t want to be second-guessed on every action. Be wary if the term sheet is a document longer than your business plan. Violation of abstract clauses may be used as a way to push you out, take over the company or pull the investment.
-
Academic coach investors. Coaching should be expected and appreciated, but you don’t have time for constant tutorials on how to run a business. A good advisor and mentor will tackle questions and then offer key insights. If an investor spends more than a day at your office before the check is written, it may be time to check your patience meter.
-
Pretend investors. These are “wannabe” investors who don’t have the means, or former entrepreneurs who don’t want to leave the arena. They always have one more issues to investigate or another set of questions, but never bring the checkbook. After a rational allocation of your team’s time, ask for a definitive close and be willing to walk away.
-
Investors without a clue. Many wealthy people make poor startup investors. They have long forgotten (or never knew) the challenges faced by a startup business. Many great real-estate people and doctors fall into this category. A synergistic long-term relationship in your business is not likely. Ask them for an introduction to wealthy business friends.
-
Investors for a fee. These are people who rarely invest their own funds, but promise to find the perfect match and live off a percentage of the action and preparation fees. They may be licensed investment brokers or consultants cold-calling real investors. The challenge is performing due diligence on the real investor.
Proactively seek out and build relationships with investors who interest you, rather than passively wait for potential investors to approach you. Finding investors is best done by talking to peers and attending networking events. Cold calling or emailing strangers will likely get you a sampling of all the eight stereotypes defined here.
Finally, you need to learn what investment terms make sense for your startup and craft your own term sheet, rather than rely on one being presented to you. Start with some legal advice from a source you trust. Do your homework and networking, but don’t chase investors like a one-night stand and expect it to lead to a mutually beneficial long-term relationship.
Marty Zwilling
*** First published on Entrepreneur.com on 10/2/2015 ***
The best dissertation service is all about learning new thing. I recommend that you skip this investor in favor of a more equal partner.
ReplyDeleteThat's really informative and this article has given me a new information. It is much helpful for me to add some points in my assignment.
ReplyDeletelaw essay writing help
Nice website
ReplyDeleteIn my opinion, entrepreneurship today is that where people are provided a solution. For instance, the rise of non fake college degree from online university is the kind of entrepreneurship as the initiator of it first thought of providing a solution to those who could not afford education.
ReplyDeleteI really like your blog! Continue to write more! Very interesting!
ReplyDeletecheap assignment help uk
The best paper benefit is tied in with adapting new thing. I suggest that you skirt this speculator for a more equivalent accomplice. academic writing services uk
ReplyDeleteThis perfection supports the economy grow I would like to add this on marketing essay writing blog, actually there's no scripted method to become an entrepreneur, but there are surely things you can do to make your business easier, play clever by avoiding disruptions and difficulties and I always follow these type of topic that is help me in making a business polices.
ReplyDeleteI really like your helpful topic because they help me start a business. Thank you so much!
ReplyDeleteBefore choosing an investor, you must evaluate all the pros and cons, this is true. Ane startup requires lots of investments and if you fail at hte beginning, there is a big change you won't try anymore. Visit our website in order to get an assistance with your homework that relates to investment deals.
ReplyDeleteIt is overvaluation of the start-up to improve additional revenue. Introducing business enterprise intends to make a good impression on the fore investor instead of the Best Dissertation Writing Service genuine strategy. Generally business owners believe that harvesting investment decision is an essential factor in a start-up trip they will fail to remember that whatever counterfeit figure shown may very well be trapped in evaluation that is certain to contribute to deficiency of assistance.
ReplyDeleteVery nice and useful tips. Well, In my opinion entrepreneur is a game changer and one man army, he used to involve himself in almost every kind of business processes and tries to accomplish it by himself/herself with efficiency, cheap dissertation writing service uk He is a self motivated individual who believes in his capabilities.
ReplyDeleteA captivating story is really important,” says Groot. “You can have a solution, but if there is no bigger story it’s difficult to get traction in the beginning. Look at broader trends in technology - take a helicopter view of the world and be able to think about high level. For instance, cheap dissertation writing services uk I see in an issue of WIRED that chatbots are big a thing now. Think of that and a way of building your story into that - it’s a great way of getting press, and press is a great way to get users. You get traction by finding proof points in your concept you are able to leverage.
ReplyDeleteEvery business require to up by getting help from investors. You just create your thought and write about your topic which is very important in marketing field. essay on marketing really a best way to understand more things related to grow your business.
ReplyDeleteExtremely pleasant and helpful hints. All things considered, As I would like to think business visionary is a distinct advantage and small time armed force, he used to include himself in relatively every sort of business procedures and attempts to achieve it without anyone else's input/herself with proficiency, shoddy coursework writing help He is a self propelled person who has faith in his capacities.
ReplyDeleteThis information is very useful. thank you for sharing. and I will also share information about best digital marketing company? But you are upset of getting 50% of what is shown to you in the thumbnails? We have the perfect solution here at Brand Platform, we have the portfolio updated of our work regarding mobile app development services, try paying a decent visit to the website and you will not be left disappointed.
ReplyDeleteThis blog is to an incredible degree significant for me. As I would see it, a business person is a distinct advantage and small-time armed force, he used to include himself in pretty much every sort of business procedures and Do My Homework For Me attempts to achieve it without anyone else's input/herself with productivity, thankful to you for sharing it.
ReplyDeleteYou are absolutely right said here about investors need to avoid. Also, proper describe 8 Types of Investors That Entrepreneurs Need to avoid stepping by step. It is much helpful in making my academic essay writers in UK assignment. Actually, I picked some ideas from your given information and add to in my assignment.
ReplyDeleteVery informative blog post.Really looking forward to read more. Great. forex steam
ReplyDeleteThis article is highlighting the most relevant points to keep in mind if we are a business entrepreneur. The economic growth is not consistent. These point that you have marked are undeniably true and because of which I stopped by and read all detail that you have provided in your article. I will surely keep this in my mind as I am a business entrepreneur, it is really necessary. I have wrote some article you can find here http://www.buyessay.co.uk/is-using-our-service-cheating
ReplyDeleteI read your blog post and this is nice blog post.. thanks for taking the time to share with us. have a nice day forexcruncher review
ReplyDeleteI read your blog post and this is nice blog post.. thanks for taking the time to share with us. have a nice day Forex Steam
ReplyDeleteI might want to think business visionary is a particular favorable position and little time furnished power, he used to incorporate himself in generally every kind of business Assignment Help London techniques and endeavors to accomplish it without any other individual's information/herself with capability.
ReplyDeleteThank you very much for providing the important informative post on "8 Types of Investors That Entrepreneurs Need to Avoid". It's been very useful for all. I am working as an academic consultant in USA and offer Excellent best proofreading services to college students.
ReplyDelete