There are a ton of people trying to create startups and raise money from investors. Don’t let your desire blind you from what you know is right.
What do I mean you ask?
I mean, it’s not all fun and games working with investors. A good percentage of them will sell you down the river so fast your head will spin.
There are some good investors too. There are good and bad entrepreneurs. Some entrepreneurs are true to their blueprint. Others blow through money too fast and are just in it for the glory. They have no substance.
You have to put that work in and make something happen before you celebrate.
Back to investors though because this post is a warning for entrepreneurs. Accredited investors have more money than you and I’ll write posts for investors later.
If your competition gets their hooks into a weak investor and your paperwork isn’t right, it can be a wrap. I’m not talking about a Hollywood wrap either. I’m talking about a nightmare wrap.
Lawsuit, prison, etc.
This goes for people just starting out and people trying to raise funds to keep a large startup and company going.
Before we go any further. A few disclaimers. I’m not a lawyer. Use this information at your own risk. Results are not guaranteed. Please add your own research to any ideas you discover here. Talk to an attorney if you have specific questions.
I have never done a deal with investors. I have done a lot of marketing for companies. Also, I have done quite a bit of reading and following of entrepreneurs.
I have turned down several offers throughout the years, even when I was flat broke. The reason is because I have so much experience following companies and watching them implode. I have seen companies that grossed tens of millions of dollars and the partners ended up spending millions on lawyers fighting over the dumbest things you can imagine.
People fall in love with their ideas to the point that they will do anything to make them a reality.
Double check this information with your lawyer but here goes.
Do not lie about how much you personally have in the bank.
Do not lie about the traction of your website, app, company, etc.
Do not lie about the amount of money you have raised.
Do not lie about anything.
Do not think your investor is your friend.
Make sure you have a plan just in case everyone starts fighting and can’t agree on anything.
Disclose everything. For example, I have bad credit. I would disclose that in writing. I would disclose every other embarrassing and negative aspect about myself too so there are no surprises.
Disclose if you have a criminal record.
Investors may give you enough rope to hang yourself so later they can have leverage over you if need be.
A lot of times people think the investor is so cool at the beginning. Then as time goes on they hate each others guts. Her or his entire family may hate you.
If your investors financial situation changes, they may turn sour on your project.
I have seen situations where investors are called on to sabotage you. Competition knows an investor can be a back door into a company. It happens all the time.
I don’t mean to be negative but I’m keeping it real.
Try to make your life and company as sustainable as possible. Meaning, you don’t need anyone’s money. That way you can possibly create a deal where you sell a portion of your company and keep 100% control.
That’s the only deal I would do.
I have told several people in the past. I’ll provide marketing services for a fee. I don’t always need a percentage.
As far as any company where I’m at the helm, I have to control it fully. I’m not going to concern myself with internal fights.
I’m not going to argue with investors or anyone about what kind of drapes we should hang in the office. I’m not saying I won’t listen to ideas. I’m saying someone has to have the final word. If not by the time everyone is done fighting, the competition will eat your lunch.
Everything will be disclosed in writing. Everything will be transparent. There will be no shared control though. I have seen too much sabotage in my life. I’m not going to get into it here. Use your imagination.
If you have people in your life that you can trust with your company, I say good for you. I don’t.
Regardless, disclose everything and don’t fib. Try and build yourself up as much as possible without the help of an investor. Most of them only want you when you don’t need them anyway.
I’m not trying to bring down your vibe. I’m saying. Once you start spending an investors money, you better have the foundation right because if you can’t pay the money back, in many cases, you’re going under a microscope. If they find anything, you can end up in hot water.