[HN Gopher] The Bad Marriage Problem (In Startups)
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       The Bad Marriage Problem (In Startups)
        
       Author : simonebrunozzi
       Score  : 7 points
       Date   : 2021-07-19 19:40 UTC (3 hours ago)
        
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       | dcolkitt wrote:
       | I agree that "bad marriages" between investors and founders in
       | illiquid private companies can be a serious problem. But I don't
       | really see how any of the points made about the post-pandemic
       | fundraising environment create a bigger risk.
       | 
       | * Shift from in-person to virtual fundraising
       | 
       | Why would this make any significant difference in terms of
       | creating a bad match? It's not like investors and founders are
       | literally spouses. Most of their working relationship is virtual
       | anyway. Status updates over email, strategy discussions over
       | calls, back and forth revisions on roadmaps. If anything in-
       | person fundraising would probably create more bad pairs, as
       | founders can be dazzled by opulent offices and investors can be
       | be fooled by charismatic presenters.
       | 
       | * Reduction in process from weeks to months
       | 
       | Most of that month-long fundraising process isn't a getting to
       | know you courtship. It's long, arduous due diligence. Maybe
       | cutting this down increases the risk of fraud or negligence, but
       | personality mismatch seems unlikely. If anything compressing the
       | process to weeks creates less of a sunk-cost pressure to push the
       | deal forward despite incompatibilities.
       | 
       | * Increased in early stage capital
       | 
       | More capital sloshing around means founders have more options,
       | and therefore are more likely to be able to pick a VC that they
       | feel compatible with. Of course, you can make the point that the
       | opposite is true going the other way. Investors are more likely
       | to rush into bed with a founder they're lukewarm about. But
       | historically, and even in this capital rich environment, the
       | balance of power tilts in favor of VCs. At least for seed stage
       | companies. Equalizing power dynamics most likely contributes to
       | better long-term matches.
        
         | Justsignedup wrote:
         | Just to clarify. A investor - > founder relationship can be
         | very stressful. One side holds the money and lifeblood of your
         | company over your head. And the other side holds the money and
         | investment hostage to operating practices and reality.
         | 
         | For investors this may be extreme stress they can't just bow
         | out of.
         | 
         | So yes, not literally a marriage but extreme stress is still
         | extreme stress.
        
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       (page generated 2021-07-19 23:02 UTC)