Good and bad investors

You might not believe it when you are desperate for money to progress your company but not all investors are helpful for your company!.
A company we started helping a couple of years ago has just passed a further funding round for $10 million. It was great news as we first saw them when there were 3 of them jammed in a windowless shed essentially

The downside is the strain on the team as they have struggled to put together the deal with the different interests of investors in conflict.

When you need small sums ($100-500k), you probably won't attract a VC as you are below their investment threshold. They may invest if they can see significant money will be needed later on but they only want a limited set of companies to look after. Sharing $100 million over 100 companies is impossible to manage compared to working with 10.

So early on you find a group of friends, angels etc. that will want to invest. These guys are great because they let you get going with your investment before bigger money (if needed) comes in.

However, the tricky bit is when your early investors come face to face with a VC term sheet! At this point things can get very exciting as the different parties struggle to agree a deal and I can only say that these negotiations can be extraordinarily stressful for the management team.

I'll talk about the optimum number of investors (in particular VC's) another time but it's at this point you will realise trying to keep 5 people happy is far easier than 50!

© Copyright 2005 Richard A D Jones 2005

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Trying to keep product secret - and why this is bad for you

I meet companies that frequently say they want to keep a low profile, stay under the radar and other phrases that mean they are hoping that no-one will notice what they are doing for a while. Forget it! You’re far better off assuming that as soon as one person in the industry knows then everyone will know. This may not be true when you have partnerships protected by NDA’s but it takes one disaffected employee, one leaver, one over-eager sales person and the secret is out. I think these companies are frightened of the result of copying it, working around it or whatever.

However, my experience is that you are always better prepared if you just assume that competitors will know what you are doing and you work faster, are better prepared etc. as a result.

© Copyright 2005 Richard A D Jones

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