A Genuine Apology to the Founders I’ve Met in my First Year as an Investor
You can read the full article here: https://hackernoon.com/a-genuine-apology-to-the-founders-ive-met-in-my-first-year-as-an-investor-a1a0c8ea0695
Since starting my fund last year, I’ve met hundreds of founders. When I started out, I knew I wanted to be one of those fabled ‘value-adding’ investors. Yet, it turned out that this investing thing is a lot harder than it looks. You’re facing a lot of uncomfortable situations with founders you really like. You’re constantly fighting mental biases around your decision making. You’re saying no a lot.
Like, really a lot.
That’s super uncomfortable, especially when you were already struggling with turning down those pesky telemarketing guys selling you magazines you don’t even want.
As you move along and learn the ropes, the value you provide to the founders you’re interacting with increases exponentially. You learn how to judge who you want to invest in faster. Your confidence goes up and you start investing based on conviction rather than fomo. You learn how to give clear no’s with actionable feedback on how you came about that decision. Although I’m still struggling with the telemarketing guys, I have gotten a lot better at providing value in my transactions. However, to get there required a lot of messing up and unconscious terrible behaviour on my side.
Therefore, here’s an unreserved apology to the founders I’ve met in year one, along with three examples of things that could have been handled better. Hopefully, there are some learnings for founders and investors alike in here.
Stringing Founders Along
This one is a classic when you’re just getting into investing. You’re uncomfortable with the decisions you make, therefore, you don’t give a clear answer. Instead, you tell founders that you’d like to “follow along” or “check back within a few months”, with the hope another stronger investor commits or something drastically changes in the business (you’re still expecting to pay the same valuation, of course).
As a founder, this is a super bad experience. You want investors that back you out of high conviction in you and what you’re trying to achieve. In other words; you want leaders, not followers. My advice to founders would be to demand a clear answer from a prospective investor. Are you in or out? That’s the only way you can weed out the tourists who’re just waiting to see if something big will happen. If they’re only there to capitalise when things are great, how do you think they’ll behave when you’re business is in trouble?
I’ve been guilty of this several times in my first year. I hadn’t developed the confidence to deliver a clear yes or no, so instead this seemed like the best solution. However, aside from tearing apart your reputation as an investor, you’re also wasting valuable time for founders that could be raising money elsewhere or focusing on growing their company. For this, I am terribly sorry.
Today, we’ve implemented a fixed process for swift and (hopefully) valuable passes with the companies we’re not investing in. This should ensure that no founder wastes their time completely when talking to us. The depth and elaboration of our passes typically varies with the amount of interactions we’ve had with a team. Although that’s probably a topic for another post.
This is perhaps the worst behaviour and sadly the one I see founders complaining about the most. You’ve pitched an investor and things seems to have gone well. The investor promises to get back within a week. However, after that comes radio silence. You check back in, send updated numbers and additional materials, yet the answer never comes. I saw this when raising money for my previous startup and god it’s a shitty feeling. It’s bad enough to have wasted the time on someone not interested, yet getting no tangible feedback is even worse. Not to mention extremely rude by the investor.
Should this happen to you, write no more than one follow-up email if you haven’t heard back. Sometimes, delays happen due to bad admin or a busy schedule. If you still haven’t heard anything by then, move on. It sucks and it’s a waste of time. Yet your time is better spent working on things that actually move your business forward, rather than chasing a phantom. Tell other founders how that investor behaved and everyone comes away stronger…
You can continuing reading the full article here: https://hackernoon.com/a-genuine-apology-to-the-founders-ive-met-in-my-first-year-as-an-investor-a1a0c8ea0695