Founders Fess-up

Hello again future founders! This problem has come up a fair amount lately in my group discussions with investors, so I wanted to re-visit it for you. Be mindful of your past and present activities and “clean up your act” if you need to.  Investors, when meeting new founders, are getting over things like casual dress, lackluster personalities and the fact that you may not have finished college. But one thing that will most certainly deter an angel’s buy-in is your record, your reputation and online behavior.

Here’s an example. A rather large company recently invested millions in a founder (to protect the not-so innocent, we’ll call him “Leon”), with a flawless presentation and a stellar team behind him. The company’s due diligence was spotty at best. Once they started dishing out the money to Leon’s group, who had reportedly been “living on canned soup to get the business off the ground,” Leon went out and bought a top of the line BMW M6 G-Power Typhoon, got high on cocaine, which apparently had been his habit for the last 10 years, had an accident and was unable to get back to work for several weeks. Stunned with this out-of-character behavior, the company, on the verge of another infusion of cash, probed deeper into Leon’s background and discovered previous skirmishes with the law and some raunchy activity for which he had used an alias. The investors got nervous and cancelled the contract.

Even before a business has a chance to succeed, a startup can be sabotaged by the founder in many ways, and this is one of those ways. Most investors and large companies will do a thorough character investigation before handing over a check. Seasoned investors, as most are highly intuitive, can often smell something fishy from the start. They will want to explore your work, medical and marriage history, past tweets and posts, your Facebook page, run-ins with the law, bad debt, and remarks of former partners and the rants of disgruntled customers.  If their findings are unfavorable, you may be cast as unreliable, untrustworthy, and incompetent. Be mindful of the behaviors, past and present that could de-rail your great idea. However, if a founder can admit these transgressions from the start and demonstrate sincere efforts to change, investors may be more forgiving. Nobody is perfect.


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