What are some warning signs to look for when dealing with VC firms?
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I'd consider true warning signs more crucial when it comes to reading people's intentions if they do want to get into a business relationship that may later turn out to be disadvantageous or otherwise a bad match.
The major warning sign in this context would be obvious personality mismatches. If you sense that your VC (or partner/consultant/angel/customer/whatever) cannot be trusted. People that are quick to spout negative opinions about your colleagues or the guys who sat at their table before you came along, be suspicious. Beware people who tend to exaggerate or have a thing where they tell you outrageous and unverifiable stories. Take into account that a VC doesn't just give you money, they should be valuable resources where important feedback and referral to connections come from. Beware of young MBA-types who don't know anything about your industry. Take into consideration that you have to "live" with these people and that they can ruin you if they turn out to be malicious, incompetent or insane.
10x this. Some investors with whom I had developed some strong relationships in the past were very secretive and never would give names or verifiable details as to deals they had done in the past; they were very cloak and dagger, which I suppose was partly why they were so interesting. They were insanely intelligent, so I had immense respect for them and considered one guy in particular a mentor. As I worked with him, turned out he had a lot of issues, verified by other people who mutually knew him. Those issues enabled me to see a side of him that caused me to lose all respect.
I felt a lot like a character in a Robert Ludlum novel, who described the way the CIA treated him. I can't write the exact quote, but it was something like, "Obfuscation, generalization, and manipulation. They give you enough details to help lead you to conclusions, but never anything concrete. Then when you finally come to the wrong conclusions and take incorrect actions, they say it's your fault because they never told you that in the first place and you're hung out to dry."
Truly good investors are happy to talk verifiable details as to what they've done. They have nothing to hide and are proud of their integrity, track record, mistakes, failures, and successes.
Remember VCs are like the guy who wants to play pool for money in a bar - right after he loses the first couple of games.
Except of course for the pool hustlers basic honesty....
"If you get a call from a VC analyst, saying "we just learned about you through...and think you fit well with our firm...would like to schedule an investor presentation..." This will go nowhere. The analyst is boning up on info, and they will suck your brain dry. They have no intentions of investing."
Dave McClure being the exception, of course (on both sides of the deal).