The New Ask: Please Let Me Invest

by Adam on April 23, 2013

I was meeting with an entrepreneur recently, talking with him about a raise he recently completed and the investors he had onboard for his current round. It quickly became clear that at some point he’d need more money. It was an interesting company, one that indeed I could potentially see an opportunity in. The conversation went something like this:

“We have a lot of interest, but if we can find a strategic fit with what you are doing, I think we’d be able to make room in the next round so that you can be part of it.”

And so the balance of scales has tipped back in favor of the entrepreneur.

The power struggle between investor and entrepreneur is an ever-evolving ecosystem, one where entrepreneurs are constantly searching for new sources of funding, investors looking for new ways to put their investment funds to work. The conventional wisdom dictates that the balance of power rests solely with the investor as the holder of money, that an entrepreneur should appreciate and grab hold of the opportunity to receive investment (assuming the money is coming from an investor you trust and want to work with), and that funds themselves are starting to dry up, so take it where you can get it.

But, at least as far as I can tell, that isn’t so for the hottest of the nation’s startups (this one happened to be in NYC). In fact, rather than monetary investment being a benefit to the entrepreneur, it seems in some cases that it has become a benefit to the investor, a way to claim your seat at the table and say, “this is something I’d like to be part of.”

My pointing out this rather subversive trend is in no way meant to downplay it or say that it shouldn’t be. In fact, in the spirit of catch phrases from our childhood, all I can say is “more power to them.” The entrepreneurs I mean. But, I will say that we have to be careful about over-generalizations and hype, two things that the startup community seems to be prone to. We have to watch out for both of these primarily for two reasons:

  1. Not every startup deserves to be invested in.
  2. Even if a startup gets good initial interest, it doesn’t mean that their model is proven or even that good.

I can appreciate the idea of more power flowing back to entrepreneurs, and I do hope it’s a trend that continues. I will say that there are some entrepreneurs who don’t deserve that position of power, but those that can gain interest from investors are well-advised to use that momentum to their advantage. I suppose the best advice to any new entrepreneur is to be fearless, and find opportunities that allow them to capitalize on interest from investors to get new investors interested in the company (and also play it like you are the next Google…).

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