

Ask HN: Founders whose startups failed, what happens to VC/angel relationships? - BIackSwan

Do they keep in touch with you? Are they open to new ideas? How do you keep your relationships going post failure?
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javiramos
The truth is, when you fail, your investors tend to have a bad taste in their
mouths. Nobody likes to lose money. Nobody likes to be wrong. Nobody likes to
sit in that space that isn’t so happy…and unfortunately for a founder, his
person at the point of failure is an embodiment of many things that nobody
likes. Now sure, an investor doesn’t dislike the founder himself. If the
founder does right and doesn’t succeed, there is no “black ball”, or
malevolent desires on behalf of an investor…but I’d be lying if I said there
isn’t a slight tinge on that relationship…and unfortunately, in this world, a
slight tinge is all the friction necessary to turn momentum into something
less. Note: this tinge is not permanent, and it is not insurmountable…but
coming off a failure…you are only as good as your next act…and weather we say
it openly or not, clawing your way to the next act, you are starting not at
neutral or positive, but with a headwind.

I’ll give the example of my own experience as a founder. My first company, I
raised about $600K. I operated for a year, failed, and returned about 50% of
the capital I raised. I felt terrible. Everyone said I did the right thing
returning the capital, that I was a standup guy for doing it, but still I lost
them money. Nobody turned their back on me, once the company wound down…but
they just weren’t leaning into investing more time and energy on me. When I
went to raise money for my second company, Hyperpublic, weather I asked them
or not, not a single investor in my first company invested in my second. Just
gives you a sense of the increased friction you face, coming off a failure.
Sure I was able to raise money from new investors, but I had to answer the
question “is so and so from your last company investing?” and so on. New
investors call old investors and say “What do you think of Jordan?” Of course,
again, investors who lose $ with you don’t “blackball” you, so they say “stand
up guy, did the right thing, etc…” but still their signal of not reaching out
to put $ into the next thing becomes something a founder has to overcome.

[http://jordancooper.wordpress.com/2013/02/13/what-really-
hap...](http://jordancooper.wordpress.com/2013/02/13/what-really-happens-when-
you-fail-in-startupland/)

~~~
wushupork
Thanks for sharing your story and being candid about it. You only hear of the
uber success in the news and everybody feels good. But the reality is most VC
funded companies fail or under perform expectations and the few winners hit
homerun and make up for everyone else.

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nmjohn
I think you're going to get a range of answers simply due to the diversity of
people and their personalities.

If you crash and burn miserably due to factors that you realistically could
and should have known about and been able to control, your VC's probably won't
be open to any new ideas from you - keeping in touch and a personal
relationship would depend on the people in question and how much they like you
as a person.

If you gave it your best and failed for reasons outside your control, or
because of things realistically the VC couldn't expect you to predict, it's
more likely they would be open to future endeavors.

At the same time though, you are going to have some VC's that if you fail,
that's it, end of relationship - many probably have more tact than just
deleting your phone number and ignoring you, but in their minds you will
become a much lower priority.

Conversely, I've seen some people who just have a great personality that form
a legitimate friendship with a VC that no matter how bad that person failed
(this instance was quite bad) the VC still loved this person.

tl;dr: People have very different personalities - it's all dependent on the
nature of the specific relationships in question.

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anon20141109
I forgot who wrote about this publicly, but I remember reading that an
investor whose money you've lost in the past is far more likely to fund you in
the future than one you've never met. I thought that was kind of funny, and
having succeeded once and failed twice, I can now say that it's true.

Also, as an entrepreneur when doing diligence on whether to accept an
investment, I always lookup some of their failed investments and contact the
founder. I want to know how the investor behaved when things were going
poorly. It's a much better indicator of whether you want to work with them
then the padded references they give you (especially when it's to companies
that badly want the investor to follow-on in their next round).

Posted anonymously as losing someone's money is still something I prefer to
not be associated with.

~~~
yuhong
_Posted anonymously as losing someone 's money is still something I prefer to
not be associated with._

I try not to post this on every thread, but this kind of thing is horrible. I
am talking about the reason OP have to post anonymously.

~~~
general_failure
Have you lost anybody's money?

~~~
serf
an investor isn't just anybody, it's someone who has signed on for the risk
inherently involved in investment for a chance at larger rewards.

There is (should be) less moral obligation since an investor should be more
acutely aware of this risk than a regular old person off the street.

I would feel terrible losing someone's money who didn't realize it was an
option to lose; an investor should not be capable of being that person.

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zeeshanm
Ron Conway had invested in this startup Ev Williams was doing before Twitter
that did not work out. Ev Williams returned money to Ron Conway, and I believe
the story goes Ron said he would invest in whatever startup Williams starts
next. That happened to be Twitter in which Ron Conway invested.

I guess the moral of this story is to do the right thing. This may sound
cliche', but sometimes doing the right thing may be the most courageous thing
to do.

~~~
eli
Maybe this is a dumb question, but do most failed startups still have enough
capital to repay seed investors when the founder pulls the plug?

I wonder if there's a more subtle lesson in that story about knowing when to
quit.

~~~
palakchokshi
We did have about 1/5th of our angel money left when we decided to call it
quits. There were a number of reasons for doing so at that time. Primarily,
the remaining money would not have gotten us to where we wanted to be and we
were not able to raise more money due to our inexperience (first time
founders). We did return the remaining amount because that's the right thing
to do. No need to burn bridges.

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evansibok
Thais is a very good question. As much as you need their cash, you also need
their connections and friendship. I would love to see the answers for this
question.

