Fundraising Tip of the Week

🍀 Investor Green Flags to Search For (and Red Flags to Avoid)

Per PomJuice:  Not all investors are created equal. Some will go to the ends of the Earth to support their portfolio companies, while others take a hands-off approach and only engage when asked. And a select few (unfortunately) end up being a drain on a founder’s time or energy, and in a few extreme cases (see: MySpace) can cause a company to completely fall apart.

Here are some green flags to look for when evaluating potential investors for your early-stage startup and some red flags to keep an eye out for to protect the valuable entity you’re creating.

💦 Deliciously Juicy Takeaways

🍀 Green Flags

🧠 Industry Expertise: Investors with a background (either as an investor or operator) can help you navigate complexities that are unique to your market.

🌐 Network: An investor with a strong network can open doors to potential customers, strategic partners, talented employees, and even future investors.

🖊️ Operational Experience: Firsthand experience allows them to provide valuable guidance, help you avoid common pitfalls, and accelerate your company's growth trajectory.

🔭 Long-Term Vision: Investors who share your long-term vision for the company will be on your side through the ups and downs you’ll face over the years.

🎁 Value-Add Support: Prioritize investors that provide some kind of value beyond a check, whether that be assistance with sourcing employees, creating brand design assets, or acting as fractional product managers.

🚩 Red Flags

😡 Overbearing or Controlling Behavior: This behavior can undermine your autonomy and hinder your ability to make important decisions for the company.

😶‍🌫️ Lack of Transparency: Strong investor-founder relationships are built on trust, and investors who lack transparency will often be more trouble than they’re worth.

🙅‍♂️ Conflict of Interest: Conflicting interests means that investor has placed their own agenda over the best interests of your company.

🥸 Short-Term Focus: Investors who prioritize short-term gains over long-term value creation may pressure you to pursue unsustainable growth strategies or premature exits.

🍰 Excessive Dilution or Control: Giving up too much equity can limit your ability to hire key executives or, in the worst case, destroy any opportunity to attract future investment.

Founder Resources, News, & Events

🔗 Links to Share & Save

• Peter Walker (Carta): Learn about equity dilution trends across various stages

• Y Combinator: Apply for YC’s first Fall Batch; applications due by August 27th

• Crunchbase: Adtech Startup Funding Has Collapsed

Investors You Should Know

✨ Featured Investor of the Week

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