

Ask HN: Doing due diligence on potential investors? - anigbrowl

I was at a networking/seminar event for film producers and investors (I'm in the former group) and met a variety of interesting people, several of whom were early-stage technology investors. As a general point, if you're an engineer and have or are contemplating a startup, attend such an event if you can - I found it a very empowering and educational experience - empowering to actually meet people out there who are actively looking to invest (there's a yawning social divide between the creative and financial communities in film) and educational in terms of hearing from investors about their needs and challenges.<p>Anyway, one person I met there - let's call him Mr X - was speaking a lot about new media, social networking and digital distribution, and mentioned investing in Y combinator. I pegged him for a member of this community, and sat down with him for a chat during  a break in the presentations. As soon as I mentioned YC he went off on a torrent of entrepeneurial excitement and investment possibilities - which I found a bit hard to keep up with, actually - but when I asked if he read HN it sailed right over his head. 'It's a discussion forum run by Paul Graham,' I added, which didn't seem to click with him either. So I assumed he was too busy and high-powered to deal with the hacking end of things.<p>But as time went on in the conversation, and in some other conversations I listened in on later, I began to wonder if he was for real - much talk of buzzwords and high multiples, and many interesting mentions, but after a while it sounded like a classic fast-talking hustle. I also noticed that the speakers who most impressed me with their insight, experience and businesslike demeanor all ended up backing themselves out of conversations with Mr X. After I got home I checked out Mr X's blog, which looked and read like he talked - lots of enthusiasm and connectivity to hot topics and projects, but little coherence.<p>I didn't dislike Mr X. He's a nice person who radiated enthusiasm, was full of ideas, and emphasized good karma and mutuality as a key part of successful business. He had insights and opinions on markets and companies that I know well, and which would find wide agreement here. But he also made me nervous, as if I were talking to someone on cocaine (which he wasn't, I hasten to add - he was just so fast and forceful in his conversation).  One instinct was telling me 'you should have a meeting with this guy', but another was telling me 'you should never, ever, bring someone like this to a meeting - you might get a deal, or you might get ejected...by force'.<p>I'll probably keep this relationship purely social, since it benefits neither party to get into any kind of a relationship if one side has misgivings. But I'm also considering the possibility that being pushed out of one's comfort zone can be scary, but is sometimes necessary.<p>Has anyone else had an experience like this, and how do you evaluate potential business partners or relationships? Are there any litmus tests you've found useful as part of your networking process?
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Scott_MacGregor
This is the second time in approximately one week that I have seen someone
describing getting a business proposition from someone who fits this
description. The other was a potential investor describing a similar
experience with someone looking for money. Perhaps it is the same person they
are describing, perhaps not.

I have met someone like this before myself and can say he clicked with a
particular individual for quite a while, and they made a pocket full of money
together. Like dating, it seems there is someone for everyone but not everyone
is right for everyone else. All people are different and have unique
personalities.

As far as looking for an investor that meets your needs and evaluating a
potential business partner, like dating, sometimes you have to get back into
the saddle. Everyone is different. As far as a litmus test, I would say just
go with your gut feeling, if it feels right you will probably know it right
away. Everyone is different.

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pg
A lot of investors know YC but not HN, so you shouldn't read anything into
that.

The best way to judge an investor (like people in many other fields) is simply
to ask people who've worked with him.

