5 Types of Startup Investors To Avoid
Entrepreneurs rely on investors for funding, support and guidance. Naturally, this type of business relationship can bring out the best or the worst in different types of investors. Startup communities around the world depend on trusted, altruistic investors who are well-aligned with their founders — here are a few investor profiles you don’t want to be and a few you want to avoid if you’re an entrepreneur.
1. Monsieur pay-to-pitch
All too often, we’ve encountered angel investors who actually charge entrepreneurs to pitch them. And without enough angel investors to accommodate new startup communities, it’s no shock that they get away with this. Don’t be this person, and don’t work with this person.
2. The puppeteer
The puppeteer, simply put, just wants to be a founder — so they tend to get overly involved with your startup concept and team. If you’re an investor who fits this profile, take a step back and consider what you really want. If you’re an entrepreneur, don’t be fooled by the over-eager support; while sometimes helpful, it’s often a detriment for a startup team.
3. The coffee curmudgeon
A classic profile in many industries: the contact that only wants to get coffee. Have a serious business question for them? Need to get a final ‘yes’ for an investing opportunity? Crickets. But just setting up a quick coffee? They’ll be there every time.
4. The terms extractor
More simply put, this person is driven by greed. They’re likely to hang on to every term in the term sheet and make ridiculous requests that slow the fundraising process to a crawl. In short, each term is catered to their needs rather than finding common ground for the entrepreneur as well.
5. The loan shark
The loan shark is also driven by greed but is also pretty risk averse. Loan shark behavior manifests itself in many ways, but a common tactic is requesting the entrepreneur to personally guarantee the round or put up collateral to securitize their seed investment (in order to ‘reduce the investor’s risk’).
Avoiding these toxic investor profiles is easy, as long as you commit to self-awareness. Learn about your strengths and areas for growth so that you can be a strong resource for others in your investing career. Doing so will only help you to build positive relationships along the way that will set you up for personal investing success.
Our team recommends, in the least, taking a minute to understand your ‘starting point’ — the investor persona that most matches your strengths and circumstances.