Ask HN: Have you ever regretted taking an investment? - maxsavin
======
prlambert
Yes.

Once someone is on your cap table it's very very hard to get them off. If it's
someone who isn't reliable, doesn't align with you philosophically, or is
unethical.... There's a world of hurt waiting. You spend the money once, you
deal with the consequences for the life of the company. Little things include
having to chase down signatures years after they've "checked out" so you can
run your business. Bigger things include blocking an exit for petty reasons,
or scaring away future, higher quality, investors, because good investors
don't want to be in deals with bad ones.

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adventured
Sort of.

Let's say, for illustrative purposes, that I took an investment from Peter
Thiel (it's someone like that). I wanted to work with this person since the
late 1990s, and finally got a chance to. They've been an amazing and patient
partner / investor, but it hasn't worked out as hoped. That part is very hard,
and very frustrating; like trying to refuse gravity. If you've ever thrown
everything you have at something, and felt like gravity was bringing the
rocket back down early no matter what you do, then you know what I'm talking
about.

I regret that the failure of the company will mean the end of working with
this investor, it was a rare opportunity. I obviously get to retain value from
the experience and what I learned. There is a significant toll that is paid
with every serious start-up, measured in years of your life, effort, stress,
difficult life trade-offs, and a love for what you do and having to deal with
that not working out. All I've ever wanted to do is build, and work with great
people; it always sucks to not come through for people you look up to, that
believed in you. Even if that person can afford the lost investment, the
principle context goes beyond money, it's the hope of creating something that
matters and seeing it prosper.

~~~
FiatLuxDave
I have had a similar experience failing a really great investor, and I am
sorry to hear that your opportunity is not working out. I see from your
profile that you are a serial entrepreneur, so I doubt that you need to hear
from me that there will be other opportunities in the future.

What I can tell you is that it is important to be as honest and forthright
when the rocket crashes as you can. You may never work with that investor
again. That doesn't mean that nothing has to come out of that relationship. It
is important to keep your reputation, especially with regards to someone with
a high profile. It is equally important to keep your reputation and
relationship with your coworkers and employees. When my first startup went
under, there was a lot of anger between me and my partner, who had left
college to work with me. But we worked through it and fourteen years later I
was a groomsman at his wedding. So, realize that things are going to suck and
there is going to be anger, but if you stay straight with them, they will hate
the failure instead of hating you. And you can share that hatred for the
failure with them, if you don't internalize the failure as being a part of
you. It's hard to do that, but it's necessary to some extent to keep following
your dreams.

There are roles other than founder which VCs need in their quiver. Failed
founders are one of the best places for VCs to find technical knowledge, which
can be important for them in vetting other opportunities. Since they have
already worked with you, they have a good idea of how much you know and how
much you don't. And they have seen failure before, and won't hold it against
you unless you do something untoward when things come apart.

Failure sucks, and failing a great opportunity sucks more. But I hope that you
really don't regret taking the opportunity, even if it led to a failure. One
thing is to ask yourself, if you didn't know if it would result in failure or
success, would you take the opportunity again? If you would, then you don't
truly regret taking that chance.

If you do realize that your venture is failing, it is good to switch to
'failure management mode'. I did this about a year too late, and it cost me
dearly (I still had a forlorn hope, I didn't take salary the last year to save
on expenses, ended up living in my car, girl left me, lots of fun). Maybe for
you, failure management may mean salvaging relationships, your love for what
you do, and hope for the future. All that emotional stuff is the hardest part
of what we do, and managing that for both you and your people is a very
important part of winding down a failed venture.

------
davismwfl
Yes, without a doubt. I can't even stress how important it is to figure out
who you are dealing with. Just expect that this person is more important than
your closest confident, closer than your lover in many ways. They will affect
your life in more ways then you can understand, so choose them more carefully
than you do a partner in your own bed.

Ok, so I am maybe a bit dramatic, but frankly it is all true.

~~~
aryamaan
Could you please share your experience (if you don't mind and of course
leaving out personal/sensitive details).

~~~
davismwfl
Sure. The shortish version is that I took an investment from someone who I
have known for years and is quite a capable investor but even before I took it
I was questioning whether or not I should. At the time I took the investment I
was in need of funding to continue growing but also I had grown my head count
too fast so I actually _needed_ the funding or had to lay a few people off. He
saw that as an opportunity to get more for his money, which he did because I
was in a weak position (in hind sight I saw this as a warning sign because he
was short sighted on the business).

In the end this particular investor questioned every decision we made, wanted
to be involved with client meetings, tried to use us as his personal
IT/development group without payment, tried to drive us into his personal
projects, would show up at the office and start asking people what they were
working on and if he disagreed he'd tell them. So overall he became a royal
pain in the ass. In the end we wound up getting him out of the business
through raising enough money on good terms to buy him out, but it is an
experience I would never want to repeat.

What I took away was that if I have any bad feelings, odd feelings or feel
something just isn't quite right, I pass now. Divorcing a spouse is hard,
getting rid of an investor can be even harder. This is because you basically
want to placate this person until you can get them out of your business so
they do not go off and become a negative effect on fundraising for you or for
the business as a whole. An ex spouse, even if they are screaming you are a
douche will be viewed as just a bitter ex, an investor doing this will turn
off other investors many times for valid reasons.

If you have specific questions happy to share my experience. I know we had a
nightmare with this one, but have had amazing help from others. Just with this
one person I could go on for a long time with the nightmares, but hopefully
the "short" version covers the key issues.

------
Jean-Philipe
Joining a startup as employee no 1. It was my worst investment. I'll be happy
to merely get the value of my work hours back some day, even in the best case
that the exit will be quite a successful one. I don't expect to get more than
what I could have made as a freelancer during those years. I'm now making way
more money just working. Simply buying the shares would have been cheaper for
me.

Now whenever I do the math for accepting shares over money, it's usually not
worth it.

~~~
mrcold
We need to learn from Hollywood. Always get a share of the profit off the top.
Any other kind of profit sharing is not worth it.

~~~
akg_67
Always get a share of the _revenue_. Example: Forest Gump author got zilch
because his share was based on _profit_ and not _revenue_

~~~
amirmc
And a share of gross revenue, at that. I'm sure all these definitions are
written in the studio's favour. Apparently, Stan Lee never got anything for
his creations either (and Spiderman grossed $800M+).

[https://en.wikipedia.org/wiki/Hollywood_accounting](https://en.wikipedia.org/wiki/Hollywood_accounting)

~~~
lmm
Stan Lee's famous for ripping off the creators of characters in comics he
published, so I wouldn't feel too sorry for him.

------
malbs
(I realise that the question is actually about taking on someone/entity as an
investor/partner)

Slightly different POV:

I had the opportunity to work for a company for either options, or accrue
extra annual leave. I took the options. Smart people took annual leave
(because it was still actually payable/real money)

At the end, as it turned out we all lost our jobs anyways, people who had
taken annual leave got extra money. I got a huge bunch of options.

Now that's fine they may have been worth something, but I still had to
exercise them. It was ok though, the CEO told us all verbally we would have 12
months to exercise them.

2 months later, I got an e-mail from the CFO asking what I was doing with my
options as they would lapse in 30 days. I had to exercise them or let them
die. I was already committed, so I thought what the hell, I'll exercise them
because otherwise I walk away with nothing

So I forked over even more money.

I wish I hadn't exercised those options. They ended up being worth exactly $0.

~~~
ww520
Did you have to pay tax on the unrealized gain?

~~~
malbs
The one upside - the tax I had to pay was on the value of the shares. The
value was zero, so I had to pay zero tax.

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moubarak
Yes. At the earliest stage i needed money so i partnered with a friend who had
nothing to do with what i was working on. I always kept him in the loop out of
courtesy, but it back fired when he started refusing some of the decisions and
pushing his own. To get rid of him i paid 4X what he originally invested and
i'm still going through a lawsuit right now. i'm paying for all this from my
revenue and end up having nothing for myself. Hopefully the judge will dismiss
the case and this nightmare will end.

------
schappim
Yes! I took investment for one of my businesses during the product / market
fit discovery faze. I regret this. The implication is we burned equity whilst
trying to create a working product / business model.

I will only now take money to scale a business that's already working.

~~~
hbhakhra
That seems to be the safer approach, if possible. Prove that an idea is
working and making some money (aka get some traction) and then seek
investment.

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MCRed
Oh yeah! There were the VCs who stopped us from doing the google business
model. There were the VCS who made us spend half the money they gave us on
another portfolio product that didn't actually do what was promised, setting
us back 2 years. (Yes 2 years!)

I've seen countless conflicts among the founding team because VCs push bad
decisions on them and some of the founders fell like they have to follow them
because they want more money form the VCs and the other half of the founders
know the VCs are full of it.

I've seen VCs push out good founders, leaving the weaker founders behind in
the company-- so they could have more control.

Notice all of these examples are VCs. Seen a LOT less shenanigans perpetrated
by angels.

~~~
jacquesm
How were VCs able to do any of this? Did you sell them a majority?

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penguin_gab
For those of you who answered yes - could you elaborate more? And also shed
some light to new founders on what to look out for, questions to ask, red
flags to look out for, and advice in general when choosing investors?

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meritt
We turned down an investment and went the revenue-funded route instead. We
grew a bit slower but it was absolutely the right decision.

~~~
elliotec
I admire this. What were the biggest hurdles? Hiring?

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kyledrake
No.

But I have the benefit of experience through osmosis, watching others get into
problem investments and learning how to avoid them. It's difficult to describe
how to do this properly, it's a complex and subtle art, and you never really
know if you did the right thing (assuming the investor isn't throwing chairs
at you during negotiations or something). It takes a lot of chutzpah to say
no, and a lot of the reasons to say no end up being buried in deep contractual
agreements even lawyers have trouble reading.

Treat investment like a loaded gun. It's a tool, but a dangerous one when used
foolishly and without control.

------
regretminor
I took an investment. It's turning out to be a 'lifestyle' business that's
been fully built out after just one small round of funding. I regretted it for
a while because I feel my parents(who are very well off) could have funded the
whole thing and we'd be sitting pretty right now. I didn't ask them originally
because I thought I was onto something big that would need several rounds of
funding. But then again the investors made THE key decision to pivot into a
better line of business, so there's always positives.

------
zbruhnke
I'll come at this question from a different angle.

We made a decision in our last startup to actually turn down a term sheet and
go heads down instead of taking money from a VC which we had seen a number of
red flags from but had committed to leading a round of funding.

I know it was the right decision to make it and even though it seemed hard at
the time I never once regretted it, but I have no doubts that if we had taken
the investment I would have regretted it almost every day since

------
pain
Family money trust trap.
[https://en.wikipedia.org/wiki/Economic_abuse](https://en.wikipedia.org/wiki/Economic_abuse)

Marginalized members of wealthier business family units deal with the
same/parallel social issues as broke, corrupt, controlled workplace/parent-
state organization cultures.

A warning to ask "would you trust your parents to look after your money?"*

If anyone fits that situation and reads here before or around trauma, read
yourself and be warned about economic abuse madly easier due to/based on how
well you are known and objectifiable by even close family.

I waited to share because it is complicated, difficult, and accumulated, to
struggle to explain at my age still.

It broke a lot of important parts of my life apart.

I am making my own version of (CC) @Painreal and #paincoin to try to deal with
that count and age of power remorse.

[1] [http://new.spring.me/#!/r/would-you-trust-your-
parents-t/660...](http://new.spring.me/#!/r/would-you-trust-your-
parents-t/660320943997989631)

------
Kinnard
Hell Yeah. When you are building a mission-oriented company and trying to
change the world it’s important to work with investors who understand what
that means to you and who are fully aligned with it. This is especially
important when your profits drive your purpose. Otherwise you will have a lot
of fun figuring this out ;)

~~~
ramchip
What's a "mission-oriented" company?

~~~
suchow
A ship whose captain would rather it sink than change course.

------
Yadi
Yup!

But it was too late to do anything about it. I was pitching like a money craze
just to set up the company and get things going. I managed to get what the
startup needed and start rolling.

But Ow Boy! Getting investment from a politician that is from a 3rd world
country can go south very quickly. We are talking about like really bad south.

I learned few things on the way:

1- Bad investment can very easily kill the company.

2- Living rough and patching things together can be a better investment than
taking someone's money that you know will cause you horrible outcome.

Edit: red flags:

1- He/she have no clue how proper investment is done.

2- No trust or believe in the actual entrepreneurs. I don't care how much
he/she offers, you've got to see it in their eyes that they are willing to do
this and you as an entrepreneur is the one.

3- Don't take a politicians investment! Bad bad money.

------
Urgo
Am I the only one who finds irony in the fact that this site is run by company
which invests in companies yet pretty much everyone who has commented thus far
has said that yes, they do regret taking a investment?

I suppose it may depend on whom the investment is from, but it also makes me
glad in many ways that I've turned down all of the people who have wanted to
invest in my company thus far and run it strictly on the revenue it generates.
(i.e. it was a hobby of mine that started generating revenue and only after
that did I bring other people on to help)

~~~
beaner
Selection bias. The people most likely to respond are those who have more than
"no" to say.

------
madaxe_again
Yes. I've also regretted _not_ taking an investment. Had I exercised some
share options six years ago for ~$5k, I'd have ~$20M+ in the bank for my
trouble.

Instead, tumbleweeds. Live and learn.

------
solve
Watch out for inexperienced investors.

~~~
7Figures2Commas
And be equally careful about the experienced ones.

~~~
MCRed
I've met no trustworthy investors-- that is to say, people who after 3 or more
years, I still consider to be honest.

This is over nearly 30 years founding startups.

~~~
DanielBMarkham
Just guessing, it seems like that no matter how you structure it, there's
always going to be a conflict of interests and values.

~~~
MCRed
Yes. In theory there might not be a conflict of values. In practice, the
conflict of interest is very real.

------
staunch
You can give up too much equity or control, which will make the company
unattractive to future potential investors.

------
FidesFacitFidem
The quality of investors varies dramatically so be mindful of who and what
you're getting involved with.

With regards to sounding out investors; talk to the companies that they have
invested in before, especially the companies that didn't do so well.

That'll often tell you all you need to know.

------
buf
Yes. To elaborate, I felt sick to my stomach when I took a particular
investment. Gut feeling that I did the wrong thing? Maybe.

~~~
maxsavin
How did it go?

PS: see new comment

~~~
buf
It went just as badly as I assumed, but for different reasons than you'd
expect. I pitched an immature product to investors, and when sales flopped, we
flopped, despite numerous pivot potentials. The investors and I are in good
graces, but we basically wasted a year of our time on the unsellable product.

------
icelancer
Absolutely. Taking money is a much, MUCH bigger risk than investing it for a
wide variety of reasons.

~~~
hbhakhra
Care to elaborate?

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DustinCalim
If people regret what they eat for breakfast in the morning, you can bet they
will regret taking on investments.

Maybe a more specific question would be appropriate?

------
idlewords
Nope.

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tptacek
Yes.

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epx
Yes, came to know antidepressant medicine because of that.

------
nedwin
Yes.

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buymorechuck
Yes.

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maxsavin
If you want to answer anonymously, I created a question on Quora:

[http://www.quora.com/Have-you-ever-regretted-taking-an-
inves...](http://www.quora.com/Have-you-ever-regretted-taking-an-investment)

~~~
iamcurious
What is the advantage compared to throwaway accounts?

~~~
throwaway88991
HN can log IP addresses, so throwaway accounts are not anonymous to YC.

~~~
iamcurious
You mean that Quora doesn't log IP addresses?

~~~
smt88
Quora isn't run by an investment firm.

