Jon Bradshaw & Peter Harris
Join hosts Jon Bradshaw and Peter Harris on another insightful episode of the Venture Capital Podcast as they dive into the topic of "Bad Moves Founders Make." With their trademark blend of wit and wisdom, Peter and Jon dissect common pitfalls that founders encounter during fundraising and beyond.
Bad Moves Founders Make
Join hosts Jon Bradshaw and Peter Harris on another insightful episode of the Venture Capital Podcast as they dive into the topic of “Bad Moves Founders Make.” With their trademark blend of wit and wisdom, Peter and Jon dissect common pitfalls that founders encounter during fundraising and beyond.
In this episode, Peter and Jon explore various scenarios where founders unwittingly sabotage their own ventures through misleading practices, lack of transparency, and unrealistic expectations. Drawing from their extensive experience in the startup ecosystem, they share anecdotes and anecdotes that shed light on the importance of trust, authenticity, and effective communication in the investor-founder relationship.
From failing to disclose crucial information during fundraising to exaggerating investor interest, Peter and Jon offer candid advice on navigating the complex terrain of entrepreneurship. Listeners can expect to gain valuable insights into avoiding common pitfalls and building lasting relationships with investors.
Tune in to the Venture Capital Podcast for an engaging discussion filled with practical tips, humorous anecdotes, and honest reflections on the highs and lows of startup life. Don’t miss out on this opportunity to learn from seasoned investors and entrepreneurs as they unravel the mysteries of the startup world. Subscribe now and join the conversation!
Episode Transcript
Jon: Welcome to the Venture Capital podcast as Peter Harris with the University Growth Fund. John Bradshaw. And we're going to begin. Do you think we should talk super fast like these tiktokers do. Have you heard some of them? I was listening to my wife.
Peter: Don't they just like speed it up, though?
Jon: I don't know. But one of them is talking really fast, like on this level. And I don't know how she just did it for so long, but maybe I just did it. And that's how they do it moving forward.
Peter: Yeah, but I think they just. They just script the whole thing out and then they speed it up. They make it sound like they're talking faster than they actually.
Jon: And they move really slow at the same time. So that way it all matches.
Peter: Yeah. I don't know if.
Jon: They brush my hair.
Peter: This some people just talk really fast.
Jon: Like super, super, super fast. Anyways. All right. Bad moves. Founders make better. This is for others than you. What bad moves have you seen founders make in the funnel in fundraising?
Peter: What about bad moves that founders make? man.
Jon: I can think of one.
Peter: All right, why don't you start?
Jon: I mean, the other day I heard someone was bagging on a particular b C? Yeah. And then I'm like, I want to go hear the rest of the story because it doesn't make sense, right? Because I've never heard anything bad about the CBC.
Peter: Yeah, And I think it was me. It was.
Jon: Not you.
Peter: And it's just like I hear bad things about you all the time.
Jon: Back story. They're like the founder claimed that they left them on like the the ninth yard line or like, just the deal is done. They're ready to.
Peter: Sign. Yeah.
Jon: And later and like, later find out this person had a lot of personal debt. Yeah. Used to build a business but was personal debt and they wanted to erase and wipe all their personal debt off but didn't disclose that upfront.
Peter: Got it at that. And then the VC pulled out.
Jon: And then the busy pulled out and they're like and they're like, this VC left me with thousands of.
Peter: Dollars. So they're like, they're like throwing them under the bus. But in reality it's because they didn't disclose everything. Yeah. No that happens, happens. Bunch Yeah. Like that. I don't know. It's, it's challenging, right? Like the founders of, like any time of year leaves a founder at the altar. it's either because the, like the VC didn't do their homework ahead of time or because the founder screwed it up by disclosing something at the 11th hour.
Peter: Right? This is the opposite. So from our other podcast, if you listen to that where we talk about like bad things VCs do, where like a VC might change terms at the very last second, sometimes founders do the same thing, right? They like, they throw in the thing at the very last second, hoping that like, well, now we disclosed it so you can't hold it.
Peter: It's against us, right? And then the Xbox and then they're pissed and they go and like badmouth the VC everywhere without disclosing the full truth. like, I think the biggest thing though, is like founders that never disclose major issues and, yeah, like I know of deals where there was something super material happening where during the fundraise, like the founders knew about it during the fundraise, did not disclose that to the investors, raised a ton of money, still didn't disclose it to the board for like months and then you know, and then like they also spend a ton of money.
Peter: All the money that had been raised, they spent it, kind of frankly, frivolously. And then the company and then went to the board and were like, by the way, we have this massive problem that we should have disclosed back when we were fundraising, but we were too scared and so we didn't. And now the entire company is done right and there's not enough time to like, save it everyone's past and furious, right?
Peter: Like that. That is fraud, right? Full stop. And yeah, I've seen fraud happen. Sadly, like multiple times throughout my career. And it's, you know, it's like one of those things you just can't it's really hard to diligence fraud because if somebody is intent on lying to you, they will lie to you. And it's really hard to to find out right until after the fact.
Peter: So that's probably the biggest thing that founders do is just that whole fraud aspect. I would say like things that founders do to kick them to, like, shoot themselves in the foot would be like not disclosing the information that the VC's need to make a decision, just thinking like, well, you know, we don't we don't disclose that. So, you know, sorry, we're not signing it and then being upset when the VC walks because like we've been in that situation where I'm like, I need the financial model.
Peter: And they're like, We don't do that. We don't send the financial. I'm like, All right, fine. Then we're not investing. And they're like, Well, well, we would like you don't, you know, it's proprietary and this and that and the other thing. And it's like, well, you know, like we need it. And as part of our diligence. So, you know, so sometimes I see that there's one founder that is notorious for this.
Peter: Like we'd ask for diligence and he would send pictures of graphs without axes and it's like, great, that's worthless.
Jon: Okay.
Peter: You know, So like, you see that, I think I don't know. It's the problem is it's really common to have to invest in a company you get super excited about, and then it's like you just know as soon as you write that check the first board meeting or whatever, like the, the company will crap the bed. Right?
Peter: And it's like all of this stuff that you didn't know about before the fundraise, right? Or during the fundraise, all of a sudden comes out, right? And that's super frustrating. But it happens all the time. Like, I get it, But it's also just it's annoying and it would be nicer if we could get to a point where people felt comfortable being authentic about the good and the bad.
Peter: And VCR's would like be okay hearing the good and the bad and still like recognizing like, okay, there's some bad here. These are risks. And being like, I'm okay taking some of these risks. Right. Okay. But I don't know everything. Fundraising and sales is just challenging, right? Like you always want to present, put your best foot forward.
Peter: other things that, like, founders do, that's, like, bad behavior. okay, so one of the things founders will do and this is another like, bit of a tightrope, but they'll, they'll reference investors and, and talk about them like they're going to invest in.
Jon: Okay.
Peter: But in reality, like maybe they have like a screening call setup, right? and I say it's a tightrope because you definitely need to build some momentum for your fundraise. And sometimes that's like all you got right? But I think there are ways to do it and that aren't like super deceptive, right? You just say, Hey, I've got a bunch of meetings teed up for this next week.
Peter: Right. That's very different from like, yeah. Like we've we've been a multiple partner meet or, you know, so-and-so's going to issue as a term sheet and it's like you've had one like 15 minute phone call with, like an analyst there. You're probably not going to happen. Right? Okay. So I've seen that, being unrealistic about like when a, like a big meaningful contracts is going to close.
Peter: That happens a bunch. And I don't know if that's because like the founder is lying or because they're just overly optimistic it's gray area it's hard to know.
Jon: Okay.
Peter: Yeah. Entrepreneurs at bash VCs I think is like it's like the equivalent of VCs bashing entrepreneurs. I just think it's called for, right? especially if it's not like, like a known issue. Like, like we talked about some of the things that VCs have done that are like poor form, right? Like, if it's not known that a VC has done that and you're like really anxiously trying to warn other founders about that, but rather like you just didn't like them, right?
Peter: I think that can be bad form, but, what do you think? Any other examples?
Jon: I think those are the main ones. I think one of my favorite is I was in a, in a pitch meeting on a board, and someone showed that here's like, they're the advisors. And one of the individuals was like, you know, top of the industry. Yeah. And someone in the room after they left was like, I know this person that so we, the individual texts that advisor, that supposed advisor Yeah like I've never heard of this person in my life.
Peter: Yeah. Yeah. So I'm like that's bad for them.
Jon: And they went from hero to zero just like that.
Peter: Yep. Yep. Look, it is so hard to get trust. Don't do anything to lose trust, right?
Jon: My favorite is that that person came back and they got mad at me on, on the deal.
Peter: For why.
Jon: The, what was it. So I told them that one of the so someone was going to invest in that individual later. this is what happened.
Peter: and you disclosed.
Jon: And I said hey I would think twice.
Peter: Because.
Jon: It was one of those people who was like a really good friend. And so I said, This is my understanding of what happened. Yeah. And then that person called me like an hour later. They said, What happened? And they said, Well, this is what happened. And then they're like, then they said, I never said that person was an advisor.
Jon: Were on your screen. Yeah. Yeah. But no put out there.
Peter: Yeah. Yeah.
Jon: Don't have an advisor screen unless someone.
Peter: Yeah.
Jon: Unless like they, you, you know you should have an agreement Right. Contract if not more. If not there should be multiple emails going back and forth.
Peter: Right. They should at least know who you are.
Jon: And then I had a while. I was a there was a fun scenario.
Peter: Yeah.
Jon: I keep things a lot more tight lipped after that.
Peter: As I a lot of VCs, when they get reference calls on entrepreneurs that they backed and they they had a bad experience, so to speak. Like I anything to say which.
Jon: But, but that's code.
Peter: But that is code, which means you should stay away. I was talking to a friend of mine, one of my mentors, and he was like, Yeah, if somebody had called me about this one founder, I would have just said, you know, after talking to my attorneys, we've concluded that it's probably not appropriate for us to comment on this particular founder.
Jon: I think someone forged my signature once. and our response was, after having this reviewed from Legal, I cannot nor could ever endorse what that person had said. Yeah. Client that claimed they said, which I didn't and I don't know ever happened of that.
Peter: Yeah but it's code. It's code. Well it's like when I get a referral or like reference calls on my students and like it's a student that didn't do anything and it was crappy. I'm just like, yeah, I wish I could give you more insight, but I just don't see very much of them.
Jon: Okay, Well, and the other thing is, before we close up this episode on bad founder MOOCs.
Peter: Now, but I'd be curious to know in the comments what, what bad moves you've seen from founders or VCs.
Jon: So we should start a Reddit thread on this.
Peter: Yeah, give us all the trash.
Jon: We're ready for it. We love trash.
Peter: We love the drama. Spilled tea. Let's go.
Jon: All right. Well, sounds good. Ever. Anyways, thank you guys for watching. Go to venture capital out of em. Gives us a six star review like comment, and we'll follow up with you and join us on the next episode.
