Navigating the Investor Landscape: A Founder's Handbook

If you're a founder or entrepreneur in any industry, this message is for you.

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Today, in the startup world, there's a growing trend of smaller, more unsophisticated investors seeking a more hands-on approach with their investments. However, entrepreneurs need to exercise caution with these investors. Typically, smaller investments can lead to more significant problems later on.

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A common issue among startups has been the desperate pursuit of funding, often leading founders to compromise their standards for minimal financial support from one or two people. It's important to assess whether potential investors or advisors have relevant experience and success to justify their involvement in your business. Many people aim to become advisors without having faced significant challenges, leading to potential problems for your fledgling company. Egos often get in the way, which rarely produces anything of value other than disdain later on.

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"Never Negotiate Your Values. Period."

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In these situations, it's not uncommon to encounter potential investors who talk more than they provide any real value or action. Founders must be vigilant in distinguishing between genuine expertise and mere showmanship. The trap here is that founders, in their eagerness for capital, may end up partnering with individuals who lack the necessary experience or success. This can be detrimental to a startup and may turn off more sophisticated investors later on. Anyone can embellish what they did in corporate America under the cover of having a paycheck, but do those skills align with what you're looking for as you build your business?

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"What Does He Do Here Anyway?"

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A crucial part of selecting investors involves questioning their past performance and motivations. Does the potential investor or advisor have a history of active involvement and trustworthiness? Can they provide more than just writing a check, such as substantial experience, a world-class network to pull in additional, more stable capital, or a proven track record of success that is relevant to your goals? These are important questions to consider.

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When considering potential advisors or investors, although background checks are essential, it's important to trust your instincts and think about whether you want a long-term partnership with these individuals. Capital has become a commodity in a post-pandemic world. In the current financial climate, where capital is as abundant as the world has never been this wealthy before, choosing an investor should be a thoughtful process, as these relationships are akin to a long-term marriage.

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"Do You Trust This Person With Your Wallet?"

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Not everyone has the caliber of Elon Musk, Peter Thiel, or Carl Icahn. As a founder or CEO, be wary of advisors who offer their services for a fraction of what their advice might be worth. Consider their true motives: are they looking to boost their ego, find personal fulfillment, or just have something to talk about with friends?

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From my experience, retired professionals like lawyers, CPAs, and doctors rarely lead a company to a billion-dollar exit. Anyone you bring onto your team should contribute not just capital but also relevant expertise and a depth of network to raise capital from. The number two rule in real estate is "never stop raising capital," and I think the same rule should apply to founders.

Excerpted from Chapter 7: “A Day In The Life” from my third book, Investing Legacy: How the .001% Invest, available on Amazon and as narrated by the author on Audible by clicking here: https://amzn.to/3OYI7lc

Autographed paperback copies only available by clicking here: https://www.investinglegacy.com/book

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