

Startup Investors Keep Secrets from Their Entrepreneurs - KnowltonThomas
http://www.techvibes.com/blog/investors-secret-code-corporate-governance-2012-11-23

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moens
This is a very important article. Its not about good guys and bad guys, its
about differing perspectives and varying expertise.

1) quote "...investor is bluffing to cover a lack of knowledge..."

\-- read: the investor has no idea what you are doing and never will. They
only invested because someone else they trust thinks its a money maker.

\-- note: this is not a bad thing, its a reflection of what they are good at:
money handling and profit making.

2) quote: "What most entrepreneurs don’t realize is that by failing to
complete a deal structure, a cap table, and an exit model in advance, they
greatly extend their due diligence period and ultimately hold up the cheque
writing, sometimes for months."

\-- read: and ultimately hold up the cheque writing, sometimes for months...
and sometimes for fucking ever. Why? Because they are too naive or lazy to do
their business homework, and the money boys walk away with their baby.

\-- note: This is also not a bad thing, it is something you _must_ be prepared
for; you're a hacker right? Immerse in some VC, finance, management and
negotiation books. See the world from their perspective, wiser is better.

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lopatin
I'd recommend the book "Venture Deals: Be Smarter Than Your Lawyer and Venture
Capitalist" for any entrepreneur seeking funding, especially if you feel in
over your head with all this due diligence talk.

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dmk23
The bottom line is you get what you negotiate.

If you act like a patsy you'll be treated like one. If you sell your value to
the investors you'll be in the position to drive terms.

That's why early stage fundraising/investing is tricky by definition. The
value is purely speculative and is little more than guesswork based on a mix
of intuition, guesswork and sheep instinct. The term "spray and pray" came
into being for a reason.

But once you are later stage you raise on revenues / cash flow / profit /
growth rate. Entrepreneur rightfully should be in the driver seat for this
type of deal.

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trekkin
Investors are probably more guilty here - entrepreneurs, most of the time, are
trying to "create value", in PG/HN speak. Investors who swindle entrepreneurs
are just making money off others' efforts.

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CBeau
Always nice to get an insider's POV and an education about what is going on in
at least one angel investor's head

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ldng
The article is signed Anonymous Angel. Is the matter that taboo ?

