Tips on Choosing Your Investors | Hacker News Reader

Tips on Choosing Your Investors

betashop.com

3 pointsbetashop4 comments

I agree with some of the conclusions but not all of them. The following are definitely true:

3. Choose investors who are investing in you. 9. Get references

Everything else is either derived from those (points 4, 5, 6) or are just not realistic in the current world of start up investing (7, 8). Yes, it's possible an investor will make a useful introduction or two but you can more easily achieve the same end with an advisory board or personal networking.

While I would love to believe in "1. Choose investors you want to work with." the reality is that unless you've worked with them before you will have no idea what they are like. This is why getting references is so critical.

If you're going to pick an investor I recommend: 1. Talk to at least one company that investor (if a VC firm that particular partner) invested in that failed. 2. Talk to at least one company that investor invested in that succeeded. 3. Look at their portfolio and see how many companies that investor is currently involved with. A lower company/investor ratio is better. 4. Have an in depth conversation about the industry where you ask THEM questions instead of them asking you. Turn the tables and make sure you can learn from them instead of them simply learning from you.

Investors are investors. They spend their time investing which means that their primary value will be their money. There are exceptions to this rule but they are few and far between.

Having started 4 companies I respectfully disagree.

If you treat investors as purely money, that's all you'll ever get from them. In this market though there's tons of money out there. It's more important to get smart money. And from my experience, it's just as important to get money that you like to be with. I made the mistake once of taking money/valuation over the person I preferred to work with and it haunted me for years having someone on my board who I never really liked.

I've started plenty of companies as well and there's a big difference between smart money and people you like. There are plenty of investors that are nice and friendly but are completely clueless when it comes to critical decision time. Some of the most knowledgeable and effective investors are not the kinds of people you would get a beer with at the end of the day.

I regret exactly the opposite decision - going with someone I preferred to work with over someone who would have been a better board member.

It's great to get more than money from an investor. It's often the case that you get money plus various intrusive behavior that is of negative value (requiring time to manage the shareholders, etc). If you have your choice of where to get money, go with the Ron Conways of the world.

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