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Getting in Bed with Bad Investors
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Getting in Bed with Bad Investors
Since I became a founder and started networking, I discovered a side of fundraising and investor/founder relationships that no one talks about. And honestly, it’s shocking.
You won’t see these stories on social media or hear them at conferences. Most people stay silent—locked behind NDAs, scarred by trauma, or just too ashamed to admit they made a mistake that cost them everything. But these mistakes? They don’t just sting—they wreck mental health, drain bank accounts, and completely destroy dreams.
You only hear this stuff after a few drinks in a dark corner of a pub. And even then, most people hesitate.
I get it. These are heavy stories. But I also believe founders NEED to hear them. Everyone says, “be careful who you take money from,” but rarely explains why. There aren’t enough real examples to make people stop and think.
So let’s change that. These horror stories need to be told. Maybe a little fear will help the next founder take due diligence seriously and realise that investment is never “just money.” The wrong investor can literally end your business—and not in theory, in real life.
Here are four stories that still sit with me:
Story 1: A founder was deep into talks with a VC. It dragged on for months, and meanwhile, their runway was disappearing fast. The VC knew they were desperate. Right before signing, they changed the deal—demanding 60% of the company instead of the agreed 30%. Backed into a corner, the founder accepted it. A few months later, they were kicked out of their own company. The VC brought in their own team and ran the business into the ground within a year. It was dead, and so was everything the founder had spent years building.
Story 2: A startup was growing, but the VC didn’t like the pace. They started micromanaging, calling emergency board meetings, questioning every move. Slowly, they turned the board against the founder. One morning, he was invited to a “quick catch-up”—he left that meeting fired. The VC bought him out completely and took over the business. The problem? The VC had zero real business experience. Within months, they made terrible decisions, ignored the market, and burned the entire thing to the ground. All that potential, wasted.
Story 3: One founder was forced into an unthinkable choice—fire his co-founder, who also happened to be his wife, or lose the support of his lead investor. The VC believed she was a “distraction” and wasn’t “CEO material.” He fired her. That decision destroyed the company and the marriage. They divorced six months later. The business folded soon after. Nobody won.
Story 4: A VC started pushing their “vision” onto the business, insisting on changes that made no sense. Eventually, the founder realised they weren’t even building the same company anymore—it was unrecognisable. When he pushed back, they clashed. The relationship broke down, and the founder was removed. Left with nothing but the mental health fallout of watching everything he cared about get twisted and taken away.
And the worst part? Hardly anyone talks about this. The unavailability of these stories, and the silence around how toxic some investor relationships can be, is exactly why we created a new theme for London’s Largest Demo Day on April 25th—“The Light and Dark Side of Money.” It’s time to shine a light on the stuff no one talks about but absolutely should. Tickets are free, but you need to join the waitlist. This is a conversation every founder needs to hear.
Red Flags and Advice from Chris Howard
Chris Howard, investor, serial entrepreneur, and researcher, shared some brutally honest advice about bad investors—and what to watch out for. His words:
Red flags are pretty f*cking obvious. The real problem is that founders let them happen. They’re too insecure or desperate for money and validation, so they say yes to deals they know are bad.
Two golden rules every founder should follow:
Power Dynamic Check – Does the investor acknowledge they are riding the success of the founder? If not, that’s a problem. A good investor sees it as a privilege to be part of your journey—not the other way around.
Do f*cking references – Speak to founders they invested in over a year ago. Get the truth.
Key red flags:
Terms sheet lies – If the shareholder agreement doesn’t match the terms sheet, walk away. That’s manipulation.
Control freak clauses – If they include rights to replace you (the founder CEO) without your consent, that’s a massive red flag.
Tranches – If they offer to invest in stages (e.g., £3M in 3 parts), they’re holding a sword over your head. Say no. If they insist, demand the money be held in escrow. If they refuse—walk away.
No signing power – If the person you’re dealing with isn’t the one signing the cheque, be careful. Yellow flag.
Extra equity – If they want more equity for “advice” or “support,” treat it like a separate deal. If they won’t agree to vesting for that extra equity, tell them to f*ck off.
Board seats imbalance – Never let investors have more board seats than you early on. Founders must hold the majority.
Selling pro-rata rights – If they can sell their rights to invest in future rounds without your approval, huge red flag.
Any term that allows them to change your team or withhold funds post-investment – Nope. Once the money is in, they trust you to use it. Anything else? Walk.
Bottom line? If an investor doesn’t respect you or the business, if they’re trying to take more than agreed, or if you feel uneasy—don’t take the money. Founders lose companies over this. Don’t be one of them.
RARE FOUNDERS EVENTS🔥
Rare FoundersStartup RunBi-weekly 5k running events for anyone in the startup ecosystem, followed by networking drinks in the nearby pub. Same time same, place. In-person event Green Park, London, W1J 9DZ, UK Thu 20 Mar, 18:00 - 21:00 GMT |
Rare FoundersLondon’s Largest Demo Day100 pre-selected founders will get on stage to pitch to the audience of hundreds of investors. Join 30+ founders who secured funding at the last demo day in Oct. Tickets to attend are FREE. Join the waitlist here. In-person event 1 Wimpole Street, Westminster, London, W1G 0AE, UK (NEW DATE!!!) Fri 25 Apr, 9:00 - 17:00 GMT |
Alexa, Ring, Nest, Apple, Roku…
What do all of these smart home products have in common?
They are must-haves in homes everywhere, and now there’s one more to add to the list…
Meet RYSE – the revolutionary way to automate your window blinds & shades.
And here’s why investors are taking notice:
📈 $10M+ in revenue and growing 200% year-over-year
🏢 In 127 Best Buy locations, with Home Depot launching in 2025
🔒 10+ patents protecting industry-leading technology
RYSE is on track to be the next big name in smart home automation—and you can invest at $1.90/share before their next wave of expansion.
Past performance is not indicative of future results. Email may contain forward-looking statements. See US Offering for details. Informational purposes only.
OTHER LONDON EVENTS🌟
HubSpot For StartupsHow to: Craft Sales Messaging That Lands Your First CustomerJoin this hands-on webinar to learn practical sales strategies for crafting compelling messaging, differentiating your product, and confidently closing deals, even against larger competitors. Participants will discover how to personalize outreach, handle objections, and build credibility despite limited customer proof. Online event Thu 20 Mar, 10:00 - 11:00 GMT |
There are way more startup events in London this week! Want to see them? Upgrade to paid to see the rest.
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