Question: What are some red flags when dealing with investors?Answer:
Relationships with investors are ongoing with many interactions taking place over the life of the investment. Investors can shape the direction of your business and either be an ally or an obstacle to achieving your business goals. Therefore, when dealing with investors, keep an eye out for these red flags:
- Different goals for your business,
- A domineering or aggressive personality,
- An obsession with control,
- A string of strained relationships,
- Lack of confidence in your and/or your co-founding team.
If your investor has investments in other startups, consider contacting the founders of those startups to ask what it’s like to work with that investor. Other founders and associates can provide you with honest answers and may either confirm or challenge any identifiable red flags. It’s vital to do your research because it may save you a lot of trouble in the future.