Funding: Is Money a Commodity?

Jeff Carter - Hyde Park Angels

Can The Wrong Investors Screw Up Your Company?

(original post on Carter's blog)

An angel investor, Carter has significant experience with early and seed stage ventures. In this post he addresses a tough issue in the startup world, "Who should we accept money from?". This is a difficult question, especially for first time entrepreneurs with little or no knowledge of how funding should work.

Key Points:

• Some people say that money is a commodity; that it doesn't matter where it comes from. I disagree.
• Especially at an early stage investors should bring value to the table as mentors.
• Beware of investors that may exert too much control over the venture.
• Don't court any single for too long (more than a couple months).
• Are they ethical?
• Research their involvement with other companies.

Carter's Conclusion:

Be aware of who's money you're taking. Intuit once took a lower valuation from one VC instead of getting a higher valuation with another because they felt that the first was a better mach for their culture.

Takeaway:

When you get involved with an investor you need to be aware of what the relationship is going to be like. Money always has strings attached, and that can be a very good or a very bad thing. Ideally you will be able to find an investor who understands the company and has a vision for it that aligns with yours. Always do your best to understand the relationship you'll have with an investor before you take their money.