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Response from Dan Siroker (January 2024)

Here's a great question from Sunghyun Cho. What's your biggest red flag of VCs when securing funding? How do you filter out bad money? So, a couple thoughts on this. First, when an investor is courting you and you're getting to know them, they're on their best behavior. So you should recognize that the things they do before they invest are almost always, um, the, the best you'll see from an investor.

Um, in that period of time. The things you wanna see is, are they willing to fly out and meet with you? Uh, are they users of your product? Are they giving you feedback? Are they being helpful even if they haven't invested? Those are all really great, um, great signs, um, if they're not, uh, doing any of those things, that's bad.

Uh, also, the other thing you should really focus on when evaluating VCs is do references. Talk to other founders that have taken their money. Founder to founder Chats are oftentimes the most honest and authentic conversations you can have. And so be liberal in reaching out to everyone they've invested in.

And, and I just ask them, you know, oftentimes I'll just do a quick short email saying, Hey. Uh, confidentially considering taking money from this investor, uh, would love your candid take. Uh, feel free to, uh, you know, text me. Here's my number. If you have any feedback, uh, or send feedback over an email or if you prefer, hop on a phone call.

The thing is, if they hop on the phone call, that's almost always, uh, a negative sign. The things that they wanna say, they wanna keep off the record. Um, and so you really should do that. Even the investors who have a great reputation. Uh, in sort of in the, the broader public sphere behind the scenes, when you talk to other founders that have taken their money, you might hear things that you would be shocked, uh, uh, were actually true.

Uh, they just, you know, do a good job of not making that part of their, uh, public reputation. So do references, uh, you know, recognize how they treat you before they get give you money is about as good as it's gonna get. So if that's, uh, you know, once they've take, given the money, then uh, sometimes their bad behavior can creep in.

Um, so that's my advice on, you know, uh, the biggest red flag for VCs and, uh, how you filter out bad money.