Chapter 5 - Investor Management
IN THIS LESSON
Investors as “Sharks”
Beware the sharks! An investor can be a shark, which means that they will tell you that they will invest in your start-up, but they have no money, or they are trying to manipulate you to squeeze you when you need money.
What they usually do is drag on the conversation with you for a long time and purposefully wait for you to run out of money for your company. Then they do one of two things: they either reveal that they have no money to invest, or they will give you a super lowball offer. In the end, it’s all a waste of your time.
The following are three signals to watch for:
Does it seem that the investor asks for meeting after meeting after meeting with you and continuously expresses interest—even intense interest—but never commits or decides?
Does the investor goad you into talking about your cash reserves or financial situation in such a way that makes it seem that they want to know whether you are close to getting desperate for money?
Does the investor lack a track record of active investments or cannot speak about other recent investments that can be verified?
It can be difficult to spot a shark in the investor community. Even the best start-up founders can be tricked, but if any investor is wasting your time, it may be better for you to move on sooner rather than later. And if an investor gives you a lowball offer when he knows you need the money, would you really want to trust that person, anyway?