Which types of investors for startups should you avoid?

Here at PitchSkills we’ve been in more than 50 investor meetings. Some investors were good, others not so much.

Not all types of investors for startups are good

After a while we began to see a pattern in the investors your startup should avoid. Dealing with one of these investors will slow you down and cost you money in the long run.

Here are 10 types of investors for startups you should avoid.

#1 The coffee lover

This type of investor loves talking. He is usually a social guy and gets along with others easily. This is the type of person who likes discussing everything with everybody. Although he might seem nice, he won’t add anything to your company.

Don’t deal with this investor: He loves talking, but he won’t invest.

#2 The staller

The staller makes you wait. A lot. This is the type of person who doesn’t return your calls and waits 5 days with replying to your emails.

Don’t deal with this investor: He is afraid of commitment and won’t invest.

#3 The follower

This type of person does invest sometimes. However, he’ll never be the first one. The follower doesn’t have a lot of confidence in his own judgement and doesn’t dare to invest alone. When you’re able to get a few other (good) investors on board he’ll follow, but yeah, who wouldn’t?

Don’t deal with this investor: He’ll only invest when your company generates a lot of revenue and is a proven success. By that time, you’ll be able to get better investors on board.

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#4 The Omniscient

The omniscient is usually a successful entrepreneur himself. He built up his empire from the ground and experienced lots of success. Although it’s great to have his experience on board, he will be difficult to deal with. This mister know-it-all will give you advice on everything you didn’t ask for. When you disagree with him, he will become cocky and give you hard times.

Don’t deal with this investor: He will cause a lot of trouble.

 

#5 The entreprevestor

Similar to the omniscient, the entreprevestor has been a successful entrepreneur himself. However, this one is even more dangerous for your startup than the omniscient. The entreprevestor doesn’t only give you unwanted advice, he executes it as well. The entreprevestor doesn’t care that you’re the CEO, ‘his experience gives him the right to do everything’.

Don’t deal with this investor: He will make himself the new CEO.

#6 The quizmaster

Just like the waiter, the quizmaster does anything to stall the investment process. The quizmaster wants to know everything about your company. If there is one detail which he doesn’t like, he will back away from the investment.

Don’t deal with this investor: The quizmaster will keep on asking questions about minor details and will eventually find a reason not to invest.

#7 The greed

The greed wants it all. The good thing about this investor is that he does sometimes invest. The bad thing about the greed, is that he wants to have everything. It’s fine to negotiate about the valuation and the term sheet. However, the greed will negotiate about anything.

Don’t deal with this investor: The greed doesn’t care about you or the company, he simply wants to squeeze the most money out of his investment.

#8 The loaner

The loaner is a risk averse type of investor. The loaner generally doesn’t do equity investments but loan investments. Be careful with this investor, since they generally ask you to be personal liable for the loan you take. If you do this, this could mean years of personal debt if your startup goes under.

Don’t deal with this investor: He could get you into personal financial problems for a long time.

#9 The litigator

The litigator is an investor who is known to sue people or companies when they do something he doesn’t like. The litigator has an army of lawyers, ready to sue you when things go bad. This person doesn’t care about you or about your company, he wants to maximize his personal wellbeing. Since he knows you can’t afford expensive lawyers, he will make your life hell.

Don’t deal with this investor: He will get you into lot of troubles when things don’t go as expected.

#10 The broke investor

The broke investor is a person who claims to be an investor, but actually doesn’t have any money. This person loves to talk about investing, but eventually will never invest. This person thinks being an investor is cool and will do anything to convince you that he is an actual investor. Many broke investors try to make a deal which gives them shares in your company, in exchange for ‘valuable’ advice for your company.

Don’t deal with this investor: He talks the talk, but doesn’t walk the walk.

What do you think about these types of investors for startups? We would love to hear from you on social media.

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