The word investment is probably the most spoken word in the Startup lexicon. The utter of the word fosters hope, anxiety, exhilaration, fear, celebration and soberness. It consumes the dreams of entrepreneurs when they sleep and the drives their daily activities when awake.
Striving for the investor meeting is the marker of being closer to a dream realized. Entrepreneurs are typically very eager for any meeting that could lead to potential investment very few consider that some meetings might be better not to take.
There is a growing and disturbing trend happening with investor meetings that should cause founders to exercise caution. It is something that first hit our radar in the past year and one-half and we, at 42Phi, have been guiding our founders over the past year on how to avoid such traps.
But it was Michael Siebel’s Post Y Combinator Demo Day Twitter Post that made it apparent how rampant the problem had become and we felt it was time to illuminate the subject matter. So when is an investor meeting really about investment or intelligence gathering? Knowing could be the difference between a successful startup of giving your advantage of your competitor.
We are on the ground level daily with our founders and see daily trends that can be missed until there is a ground swell. Here are only a few of the examples of what we have had to warn our founders about:
1. An investor has invested in a competing product and asks for a meeting, be sure to ask upfront the nature of the potential conflict.
2. An investor says that want to take a meeting about investment, but only after they share their deck with one of their portfolio companies and meets with them first. Oh yeah, and the portfolio company is actually a competitor.
3. An investor says that want to take a meeting about investment, but only after they share your deck with one of their portfolio companies and you agree to meet with them first. Oh yeah, and the portfolio company is actually a competitor.
If any of these have occurred, please avoid taking the meeting or be certain that you are clear of the risks that exist with taking the meeting. For help in strategically navigating a similar situation, reach out to our team by signing up for a WhiteBoard Session.