RTC #28: How do you know who is a "good" investor?

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📢 Top 7 links of the week

👉 VC associates use a lot of complicated terms (Link) - My favorite this week

👉 Fundraising is a F#@! up process - a founder about “standard VC behavior” (Link)

👉 Three of the most common patterns in the most successful founders (Link)

👉 How to set up your weekly metrics review (Link)

👉 How 2 high school teens raised a $500K seed round (Link)

👉 Is Europe's growth funding gap a myth? (Link)

👉 AI won't take your job but people who are "experts" in AI will 😉 (Link)

📖 Report of the week

The Essentials of a Killer Pitch Deck 💸💸💸

🤿 How do you know who is a "good" investor?

I think one of the most inflated terms among investors is “value-add”.

Over the years, as venture capital has matured, the industry has become more competitive. It is no longer sufficient to provide "only" capital to secure the "hot" deals. Founders now expect more from the investors they include on their cap table.

A quick reminder on why only these outliers are interesting for VCs? 👇

This is also the reason why we have seen a trend towards more specialized investors and venture capital firms. There is a need for differentiation and specializing is one way to show a particular expertise.

I think this is a positive development, but in my view it alone is not sufficient to qualify someone as a "good" investor.

There are specific traits that successful investors often show, in addition to expertise in a particular industry or vertical.

Spoiler: It is not celebrating the EXIT on X and LinkedIn after having disappeared since the investment.

During my investor journey, I have identified three of them as my guiding principles for my role as an investor:

The 3 traits to be a “good” investor.

One general rule upfront: wait until asked.

✅ Providing specific support or advice (vs general strategy)

• Specific things are:

  • Make introductions (most common)

  • Help find other investors

  • Help find a lawyer or tax advisor

  • Help find an office

✅ Helping founders to think bigger and set the right goals

• Often, founders either set goals that are out of reach or not ambitious enough

• Help establish ambitious yet achievable goals

• This is the best way to create a self-reinforcing momentum

✅ Always showing up and being there when needed

• A startup journey is an emotional rollercoaster, founders need emotional support

• It is about showing that you are with them

  • Respond to the update

  • Leave the camera on during board meetings

  • Attend the launch party

• Most importantly: listen to them

  • Founders can reach me 24/7 - I will take the call

  • I know they need me when and if it’s only that they need someone to listen

🚫 I can't leave without addressing a few 'no-gos' I've seen too often among my fellow investors

• Negotiating terms aggressively and pushing for maximum shareholding at the beginning (and messing up the cap table right from the start).

• Charging for certain services or consulting instead of offering help freely.

• “Control freak”: randomly requesting updates and offering unsolicited advice.

Final thought: An investor should not have a big ego. The reality is that the best investments will do quite well without them. They should be there for the rare times when founders might actually need their help.

💰 Want to make sure to have the “right” investors in your pre-seed or seed round?

➡️ Book one of my “20 minutes for EUR 20” sessions and I get you covered

Explore today’s topic further with these useful reads

This was it for today.

If you liked this issue, why don’t you recommend Road-To-Capital to one person today?

You would make my day! Thank you so much.

Yours,
Stephan 👋

Issue #28 | 25 June 2024