How to find investors with integrity

Dear Clint,

As the founder of a startup with some momentum, I’m currently in discussions with several venture capital firms about potential funding.

I have some concerns about the negative traits I’ve heard through my network about VCs in general. These traits include adding clauses in agreements that ultimately give them more ownership, micromanaging when it comes to hiring, taking forever to make decisions, and interfering with the direction of the company.

How can I navigate these potential pitfalls and ensure that I choose a VC partner who will support my company’s growth without compromising its vision?

Sincerely,
Cautious Founder

Dear Cautious Founder,

Ah, the sweet smell of venture capital — like a new car’s leather seats, enticing until you sit on them after your car’s been parked for hours in 110-degree heat.

You’re right to be cautious; the VC world is full of big promises and even bigger strings attached. Indulge me, if you will, with another parable: you’re getting into bed with someone who insists on adjusting the thermostat every five minutes and then, just for kicks, decides to move your furniture around while you’re asleep.

You don’t want that. Instead, you should look for the opposite of that. It’s crucial to carefully consider the source when deciding to accept money. Like all human beings, there are good VCs and bad VCs. Make sure you conduct your own “due diligence” by speaking with companies they’ve already invested in and understanding their reputation within the community.

My advice: don’t raise money.

At least for as long as you can; the more you can build on your own the more control you’ll have over your destiny. If end up having to raise money, well, my advice would be to choose your VC partner like you’d choose a roommate. Look for someone who won’t raid your sock drawer or eat all your cereal.

Of course, I’m not saying anything ground-breaking here. Paul Graham's 2005 essay on the subject still rings true.

Yours,
Clint Betts

Contact Clint
Email: dearclint@ceo.com
Phone: (385) 217-0670