Read on Twitter
As a follow up to my post on how to get into micro angel investing, tonight’s thread is about just some of the things that have and can go wrong that you may not have thought about:
>> https://twitter.com/dunkhippo33/status/1351270052801048577
>> https://twitter.com/dunkhippo33/status/1351270052801048577
1) Embezzlement
I’ve seen this happen 4x.
And yet, given that I’ve invested in nearly 400 companies, that’s an incredibly low %.
It both gives me faith in humanity that most founders are good people.
But for my friends who were in those 4 cos, they lost it all.
I’ve seen this happen 4x.
And yet, given that I’ve invested in nearly 400 companies, that’s an incredibly low %.
It both gives me faith in humanity that most founders are good people.
But for my friends who were in those 4 cos, they lost it all.
2) You may be wondering “why didn’t they sue? Why didn’t they call the cops?”
They just felt it wasn’t worthwhile because the money was gone.
They just felt it wasn’t worthwhile because the money was gone.
3) The other interesting thing about these cases is that all the founders of these cos passed background checks. No criminal records. Upstanding citizens.
You can do all the due diligence in the world and still end up working with criminals.
You can do all the due diligence in the world and still end up working with criminals.
4) Another situation that happened a couple of times: 2 ppl in a relationship start a company together and break up while running the company.
I once had to help a founder figure out how to work out a deal w her ex-husband / former co-founder to get him off the cap table.
I once had to help a founder figure out how to work out a deal w her ex-husband / former co-founder to get him off the cap table.
5) Another founder of mine overstated his visa in the US. This is obviously a big deal!
The was a precarious situation, and the company likely would have slowed / shut down if they moved back home. I was fortunate to be able to call friends in Canada to help them move there.
The was a precarious situation, and the company likely would have slowed / shut down if they moved back home. I was fortunate to be able to call friends in Canada to help them move there.
6) Many many many founders unfortunately have faced co-founder deaths or illnesses or family health issues etc.
Even if everything is going well, this is incredibly common & often lead to company shutdowns. For this reason, I mentally never count my winners - anything can happen
Even if everything is going well, this is incredibly common & often lead to company shutdowns. For this reason, I mentally never count my winners - anything can happen
7) The flip side is if you do meet founders who have faced extreme adversity such as described above or other things & emerge stronger, my learning is to definitely offer to invest.
People who come to mind whom I admire are @bkparikh @anthony_j_zhang @PierreLaguerre5
People who come to mind whom I admire are @bkparikh @anthony_j_zhang @PierreLaguerre5
8) Next, co-founder disputes are common! Sometimes too bitter.
I’ve seen lawsuits! I’ve seen an entrepreneur slander his co-founder on a public website.
They can get bitter and extreme and disrupt the business (as an understatement)
I’ve seen lawsuits! I’ve seen an entrepreneur slander his co-founder on a public website.
They can get bitter and extreme and disrupt the business (as an understatement)
9) Once, a founder I know, physically assaulted his co-founder at a party.
These things are shocking but they happen.
These things are shocking but they happen.
10) I could go on and on...so many things can go wrong in ways you cannot predict.
I think I’ve seen it all and yet I know there’ll be a new variation on any and all of these tmrw.
I think I’ve seen it all and yet I know there’ll be a new variation on any and all of these tmrw.
11) So if ppl wonder what VCs do all day. Certainly the bulk of the work is the usual stuff - fundraising, mtg new cos, working w portfolio cos.
But I don’t think firefighting is something I’ve heard any vc talk about in detail.
But I don’t think firefighting is something I’ve heard any vc talk about in detail.
And if you have a larger portfolio - regardless of whether you are a fund mgr or a micro angel - statistically speaking, you will be firefighting.
Startup investing is about ppl. And sh*t happens to ppl or ppl make poor decisions.
Startup investing is about ppl. And sh*t happens to ppl or ppl make poor decisions.
13) So lastly, if you don’t like dealing w ppl and their issues, investing in startups won’t be fun.
In fact, the #1 complaint I’ve heard about startup investing is that ppl don’t realize they would have to mediate or deal w lots of ppl problems.
In fact, the #1 complaint I’ve heard about startup investing is that ppl don’t realize they would have to mediate or deal w lots of ppl problems.
