Choose your investors as carefully as you would choose a spouse. It should be obvious, but we focus on getting financed, as if money were the only object. Investors are partners. As with marriage, in which the wrong partners can ruin your life, so too with investors. The wrong partner can ruin your business. That can also ruin your life.
It should be obvious but it isn’t. Entrepreneurs long for financing. I had a friend who spent years trying to "get financed" and did nothing but shop his deal in the meantime. That’s deadly. He was like the empty-eyed unshowered two-bit gambler in Las Vegas, living poorly off hope for a big win. Don’t let the lure of "getting financed" cloud your vision. You’re much better off with no deal than the wrong deal.
I’ve been playing phone tag with Dave Chen of OVP Venture Partners because I want to credit him for the first time I heard somebody suggest entrepreneurs should choose a venture capitalist as carefully as anybody should choose a spouse. I heard him give a talk about that subject at the University of Oregon New Venture Competition.
The wrong partners will push you in the wrong direction, want the wrong thing. Dave pointed out the problem very well. With investors, you don’t just get their money, you get them also in business with you. You’re going to wake up with them every morning, and go to sleep with them every night (metaphorically, but still … ).
The right investors will be good partners. They know your field. They have contacts who can help. They have antennae pointed in the right direction. They have relevant experience.
How can you tell? Keep your eyes, ears, and mind open. You’re not going to get very far down the road without meeting them, spending time with them, talking about issues. Don’t go blindly unconcerned about compatibility. Have the courage to say no to partners who don’t fit. Imagine them as everyday companions. Will they help you? How? Will you want to get them on the phone? Will you look forward to meetings.
Thanks to A VC for pointing me to The Funded, a website collecting reviews and opinions from entrepreneurs about the venture capital firms that funded them. This is a spectacularly important site to someone looking seriously at taking venture capital money.