As Russian investors check out the entrepreneurs before the deal

How do you check the reputation of the founder who comes to you for money. Mainly we are dealing with budding entrepreneurs who have not managed to “light up”. We study their resume and experience, as well as their history through the airport security.

We, basically, checks whether the founders criminal record and history when they performed their obligations, at least as borrowers. This is an important Wake-up call, which often gives us a signal that the person is not worth dealing with. Have there been any instances where you were refused the company in financed because of the reputation of the founder.

In each set we have teams that we do not provide financing for these reasons. Under what conditions would you work with a startup, deceived another Fund.

How to protect yourself in this case. Extremely difficult question. The situation is usually more complex and need to understand. But, in General, if there is “cheating”, we are likely to abandon the transaction.

How is it that the startups usually try to fool the investor. The most common methods is to attempt to squeeze investors from the growing business.

From the series — “thanks, your services are not needed”. Accordingly, trying to upload operations to another legal entity or redeem the investor on the price of entrance, mimicking that nothing happens, and making a big contract in parallel. The founders always have more information about the company.

Is it possible to clean up your karma and make the investor believe in yourself, if you have already once slipped. Morality and ethics do not expire.

How do you check the reputation of the founder who comes to you for money. Of course, we try to work primarily with entrepreneurs, who know, or those who recommended to us by a trusted source. Entrepreneurs, business angels, accelerators, foundations, seed investment. But in Russia this medium is just emerging — therefore we make work that is akin to an HR Agency, is looking for all available information about the team or particular person, using all public and private sources.

Have there been any instances where you were refused the company in financed because of the reputation of the founder. Yes, of course. We are given to understand it right, but sometimes, for ethical reasons, in the presence of conflicting information just suspend communication.

Under what conditions would you work with a startup, deceived another Fund. How to protect yourself in this case.

In the presence of deception that someone is trying to hide — never. How is it that the startups usually try to fool the investor.

Most often, embellish your business and especially online business to inflate their figures and show the best metric when negotiating the price of a company when investing in it. We always ask to be honest, as the cost is estimated by faith in the future of the company based on the magnitude of the market, technology and team. Such behavior of entrepreneurs I personally am OK. But if entrepreneurs are wishful thinking and, thus, try to hide any “sins” in your business — when found — we say “enough”.

In General, any “red flag” leading to “stop” so as to live with the team will need a few years to ten, and so you need full trust. Only need to clearly distinguish between deliberate fraud and a desire to embellish your business.

Is it possible to clean up your karma and make the investor believe in yourself, if you have already once slipped. We are very tolerant to the previous failures, as they teach more than previous success. But the deception and failure are two different things. Of course, if the entrepreneur “confessed” even before beginning detailed conversations, of course, all will be determined by the essence of “deception”.

We are all people and all shared error as in business and in personal life. How do you check the reputation of the founder who comes to you for money.

We were a bit easier to solve the problem of personal verification of founders, as we put our seed investments only in a very narrow industry niche, so social connections to use when checking much easier. We will ask the project about its history, angels, business partners and investors, as well as the resumes, career founders, then in some cases making a few inquiries through possible mutual friends. Mandatory we monitor the Internet and social media for possible public scandals.

Cant say that a scandal in itself gives a negative recommendation in the case when the person in conflict is right, but if this is not an isolated case, it may indicate an inability to resolve conflicts, and this is an important requirement for the success of the project. Have there been any instances where you were refused the company in financed because of the reputation of the founder.

We have never had cases of failure reputational risk team of founders, compromising the team, but there was one case where we denied a team that is clearly on his last project demonstrated the lack of public reputation management and critical environment. Founders should always be ready, opening a new project to attract investors, to radically revise all his previous experience working in a public space. The second real case in our practice is when we stopped further tranches after had to admit the teams inability to at least the minimum financial reporting.

However, malicious intent in the violations we found, but even simple carelessness with money is an important symptom. Under what conditions would you work with a startup, deceived another Fund. How to protect yourself in this case.

We have similar cases never happened, but our projects, which I mentioned, is easy to find yourself following the money from investors, unwilling to receive feedback on past projects. With regard to our approach to the problem, if the fact of fraud was confirmed by analyzing the arguments of both sides, we in any circumstances will not invest in such a project.

As will never invest in the project without checking reputations, and we are particularly attentive to all questions the legality of obtaining intellectual property rights and fulfillment of obligations on payment. Perhaps there are times when investors, who thought the project was not completely honest with them, cant lead sufficient arguments, but the fact that such negative opinions on the us market seriously should be concerned. Perhaps we could invest ceteris paribus, in the event of withdrawal of the last objection of the investor.

I think Guild solidarity is the most important market institution providing comprehensive risk mitigation and attractiveness of the venture segment of the economy for new investments. How is it that the startups usually try to fool the investor.

We rarely encounter a professional fraud on the part of startup founders, a few cases that I remember, anyway, have been associated with the conflict of interests of founders and incorrect ownership of intellectual property project. But we found out that the normal checkout process, and among our portfolio investments was only one case where the founders had failed to fulfill its counter obligations on the legal transfer of a share in the company in exchange for investments. We believe that dodging it was not malicious, but stemmed from wrong prioritization of founder problems, so we left a precedent without legal consequences, hoping for the wisdom of the team.

However, it is unlikely that the project can count on new installments with our participation. Is it possible to clean up your karma and make the investor believe in yourself, if you have already once slipped.

I believe that this procedure have been described in criminal law and is called the “active repentance”, which, from our point of view, only able to strengthen our faith in the project team as already made all the conclusions from the negative experience. Unfortunately, not only in our practice, but generally the market is active repentance is very rare precedent, people usually in the worst case start including at the level of public scandal to stick to their guns against the obvious or at best promise never to do that, which indicates very low overall business ethics in the era when people in breach of their obligations, almost without any risk, in addition to reputational. That is why we are the most thorough in it is reputation risks of projects, as the rest of the project can learn, but honor must always be protected from the youth.

How do you check the reputation of the founder who comes to you for money. Most projects come to us already with recommendations.

But other founders do not come to us from airless space, we have a great networking and we can always get the necessary feedback from colleagues. Have there been any instances where you were refused the company in financed because of the reputation of the founder.

Precedents, when we were denied funding because of the reputation of the founder, were and will be. Moreover, every time we tried to close our eyes to previous unsuccessful experience of cooperation with the founder, the results were always bad for us. Under what conditions would you work with a startup, deceived another Fund.

How to protect yourself in this case. If we clearly know that the startup has previously deceived the Fund, we are not going to work with him under any circumstances. If there was a conflict, we will try to hear both sides, but it is an important signal for us. Extremely high chance that the conflict will happen again.

How is it that the startups usually try to fool the investor. Ways to cheat investors in Russia quite a lot, the easiest is to take the money and spend it on the lifestyle of the founder.

Or withdraw the money through another project to which the investor has no legal relationship. To secure the investors 100% impossible, but you can reduce the risks. To be careful when checking the reputation of the Fund and to communicate with project. We are continuing such case is already in court, we work with a very strong team of lawyers.

In our practice there is a case where entrepreneurs have behaved dishonourably, built a company that gives insufficient turnover, and then it would be closed, but the product that brings money left. Is it possible to clean up your karma and make the investor believe in yourself, if you have already once slipped.

If will be seen that the core of the conflict was not the desire to steal, and the lack of understanding between the founder and the investor, and the founder steps were taken to remedy the situation, then surely you can fix the karma. But why improve the karma of him who, simply put, is stealing. We invest in projects to help them build something great. Even with a very good background, a project that steals things, in the end, is gradually falling apart.

People spend their time, our money, but in the end the main thing that they lose is the opportunity to launch a big and good project, because if we already have an idea and are ready to invest in its implementation, this means that she has good development prospects in the market. How do you check the reputation of the founder who comes to you for money.

Reputation is the opinion about the man, his work colleagues, existing and potential customers — and learn it. Most often no one says bad, especially in remote and not personal communication, but you can hear the desired information “between the lines”, as well as to verify the facts announced by founder. Here in most cases, and revealed unpleasant surprises. Objective data, such as data about the assets or judicial proceedings, standard work procedures.

Have there been any instances where you were refused in financing because of the reputation of the founder. Yes, this is a common situation in the early stages of project analysis. If the founder is not considered the industry expert in their field, for an investor it is a “red flag”.

Under what conditions would you work with a startup, deceived another Fund. How to protect yourself in this case.

We would not have to work with the founder of this startup. But in conflicts of investors and founders is not always possible to understand who was wrong. How is it that the startups usually try to fool the investor.

Misrepresentation of your experience and competitors. Inconsistencies in the responses, the position changes, the unnamed facts found in public sources — all this undermines the credibility of the founders.

Is it possible to clean up your karma and make the investor believe in yourself, if you have already once slipped. It is possible, if the investor is wrong at the stage of due diligence. There are many examples where such a rebellious entrepreneurs are consistently successful fundraising from three or more investors.

Its harder with institutional investors, but in the case of individuals, family offices or captive funds (where one person can emotionally make a decision) and state agencies is often found. How do you check the reputation of the founder who comes to you for money.

Best test — recommendations. The higher the credibility of the Recommender, the more the weight of such a recommendation. A good recommendation will override any rumors or gossip that trail inevitably accompany any successful entrepreneur, so the rumors I never am guided. Requirements for the employee and the entrepreneur are completely different, respectively, the concept of “good reputation” are often the opposite.

The main qualities of an entrepreneur — maniacal ambitions, obsession with his success and focus on the product, the willingness to do anything for the sake of success is often harmful at a corporate office job. An employee with a crushing reputation can be a potential founder of a billion dollar business, and the perfect employee.. let it remain a perfect employee. Have there been any instances where you were refused the company in financed because of the reputation of the founder.

Of course, this happens very often. The first impression about a person can be deceiving. A good salesman knows how to create the right aura of charm around him, but as the interaction of the charm fading away, especially if the resulting recommendations are ambiguous.

Politically correct in the world of business can be very difficult to get an objective assessment, especially when trying to get a recommendation from a stranger whos not ready to be Frank with just anyone. You have to switch to a special “Aesopian language”. Fortunately, in the world investors it is quite simple. If the Recommender believes in the future success of the business, he recommends it with their money. If the Recommender itself does not invest, then the value of such recommendations is greatly reduced.

Recommendation level “hes a bad guy, but I know what hes capable of, so invest” works much better on the reputation of the entrepreneur than “hes the perfect leader, the employees and associates adore him, he plays divinely on the piano and helps the poor every weekend, but just the profile of his business is not quite consistent with our investment strategy now”. Under what conditions would you work with a startup, deceived another Fund.

How to protect yourself in this case. Investors often feel cheated when you lose money. The mere presence of the offended investor behind does not mean bad reputation. You need to look at the real picture — what happened there before.

There are often situations when the investors own fault. Has not fulfilled its promises, made too complicated and confusing decision, got greedy and created impossible conditions for future funding, and so on. The only unacceptable scenario is when a businessman was caught stealing (in any form). Venture capital business is built on trust — the trust needs to reduce costs on managing and overseeing the flow of funds. If there is doubt about the level of confidence to invest is not worth it.

Investors in Silicon Valley over the decades has developed the necessary mechanisms for the protection of. It is the recommendation of other investors and legal machine. Case law allows the template to specify these mechanisms are legally and use them without having to clarify every point. If in the Charter it is written that in case of dismissal of the founder of the business “with cause” (for cause) he loses all his nerasprodannye shares, any judge will quickly solve the issue in case of any differences in understanding what is “cause”.

How is it that the startups usually try to fool the investor. There are many scenarios where an investor may consider itself defrauded, although the entrepreneur is sure that he acts in the interests of business (as, indeed, on the contrary, when the entrepreneur believes that the investors he cheated).

The worst for the investor lies when the entrepreneur spends investor funds in an inappropriate way. It is not only the direct theft, but also other forms of conflicts of interest, for example, when the entrepreneur has other business that directly or indirectly benefits from investment, but without the participation of the investor. Even diverting the attention of the entrepreneur from the core business to related projects can be perceived as cheating (“We invested in you, not in a legal entity. If our main asset used by someone else is a misappropriation of our funds”).

Just the other day I heard of an investor with a successful entrepreneur, whose business he invested in the first round. — Hows it going with the next round. — Everything is fine.

We have more investors than we expected. — Oh, cool. Then we too will take part in this round. — Heres the thing.. Not sure we got the place for you. — Okay, we dont need a lot.

We just pro rata their right use (the investors right to participate in any round in proportion to its current stake). — Here is the deal.. we Have a large the famous investor comes in, which as a condition of investment has put the failure of all previous investors from the pro rata. And we really want this to work on investor.. So you have the right to refuse. The investor sits and thinks.

“Im not good enough for you as an investor, in order for me to stay. For the larger investor you are willing to deny me the right to confrontation”. I suspect that at the previous round, the investor has stamped entrepreneur on conditions and the assessment that he should be turned over, when the opportunity arose. Whos who cheated. Is it possible to protect yourself from it.

Only good relationships and active collaboration between funding rounds. Is it possible to clean up your karma and make the investor believe in yourself, if you have already once slipped.

With thieves and rogues no one wants to work. Enough market you can always find a new investor and begin to spin, but sooner or later unsuspecting investors will end. Each investor has its own “black list”, and they usually share information among themselves. Once in such a list, to get out of it is possible only in two ways — they move to another market, or making something so meaningful, so for the sake of participation in the business, investors were willing to forgive all past transgressions.

The winners are not judged. In the end, investors like to invest in entrepreneurs who have a reputation of assholes who would do anything for success. If only there was a result.

Source: google.co.uk/

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