Protect the house... then build the castle
https://contrarianthinking.co/protect-the-house-then-build-the-castle/
#1: “JACK OF ALL TRADES”: When someone lists more than 2 jobs or 2 companies they have at any given time, consider the flag waved. No, you do not do 10 “board” positions or startups well simultaneously.
#2: “BUILDING THE BRAND”: If someone has a new startup and a podcast? Immediate no. Grow the business first, not your brand.
#3: “LOOK AT ME”: You walk into a startup founder’s office and the walls are covered in articles about them. Framed self-portraits? Run, don’t walk, away.
#4: “LACK OF ADULTS”: At my last VC firm, we used to have a process where we’d analyze the cap table of fellow investors and ask to get all their LinkedIn profiles, and sometimes contact information, to make sure the other investors were pros and not neighbors. You’ll be amazed how often the board, the cap table, and the co-founders are all “yes” men. You want pros, not bros.
#5: “A CROWD OF COOKS”: If you have a company with 3+ founders, it’s a no. Too many cooks means a disaster in the kitchen. There can only be one, maximum two, decision makers.
#7: “EBITDA(C)”: Bill talks about these as “unique financial data representations.” Which in simple speak means, if you can’t use traditional metrics to show your progress or lack there of it, it’s a red flag. Return on invested capital, earnings before interest, tax depreciation and amortization, free cashflow, net profits, revenue
#8: “AVERSION TO AUDITS OR TAX RETURNS”: Bill talks about audits as a normal part of getting large checks post series A. I think of it like this. If the person who wants you to invest in their company says they are materially different than their tax returns, either they lied to the government (so they’re probably cool lying to you, too) or they are quite bad at financials.
#9: “SIDE HUSTLE IS YOU GETTING HUSTLED”: Bill says it like this: “Of all the checklist items, this is the one that is an absolute non-starter. No one operating a venture backed startup should be simultaneously running another corporate entity that has overlapping interest, competing interests or even potentially competing interests. The standard should be the appearance of impropriety. The potential for bad behavior is simply too great. If there was a recipe book for corporate fraud, this would be the first chapter. Just say no. Plain and simple.”
#11: “SHOW ME YOUR…UPDATES.”: The way you give updates to investors shows me the way you run your business. Period. I get hugely annoyed with poor company updates. Quantitative investor updates concisely explained with appropriate context is my love language.
#12:”BEWARE OF LARGE FOUNDER EXITS”: You never want to be a buyer in a pre-public round where the person you are negotiating with is a very large seller. You should assume they know something you do not.
#13: “BUT THEY ALL DID IT”: If they need an immediate decision, it’s a no. If it’s an exploding offer, let it explode.