1. Some money can't be asked!
Shopping malls are like battlefields, and not all investments are good. Some investors can't ask for money.
1. Borrowing investments.
a) This "investment" mainly occurs in seed rounds, angel rounds, and a few in A rounds or pre-A rounds.
b) It is nominally an investment, but in the form of a "loan" in the investment agreement. If the start-up company develops smoothly, continues to make profits, and continues to have new investment and financing coming in, then the investor can choose to continue to hold it, or it can choose the right of first refusal to sell all or part of the shares, and the requirement is to cash in all of the principal with interest + profit growth + valuation growth.
c) However, in most cases, the start-up is in a difficult situation, or even struggling on the verge of life and death, at which point the investor requires the start-up company to repay the principal and interest in accordance with the "loan agreement". If the startup company and the entrepreneur do not return it on time, they will meet directly in court, and at the same time demand that the assets of the startup company and the entrepreneur be frozen! Entrepreneurs are often forced to sell their homes or borrow loan sharks to repay their "loans", and startups are in a more difficult situation.
d) Whenever you encounter this kind of "borrowing investment", entrepreneurs should not have illusions and stay away from it!
2. Routine loan investment.
a) This kind of "investment" is more likely to occur in angel rounds, A B rounds.
b) There have been such investment companies in East China and North China that "sell dog meat on the head of a sheep". Nominally an investment company, but in fact it is a variant of loan sharking, and many of them are a group of people who have borrowed money from routines. This kind of "pseudo investor" does not consider whether the start-up company can complete the performance VAM, and even subjectively deliberately does not allow the start-up company to complete the performance VAM, and then "knocks the bone and sucks the marrow" style to squeeze the start-up company and entrepreneur dry!
c) This kind of "routine loan investor", with a distinctive routine loan style, appears to be particularly heroic, powerful, and fully trusts and believes in the entrepreneur when they begin to communicate; When the VAM agreement is signed, a series of extremely difficult performance VAM tasks are proposed, and then the liability for breach of contract (VAM failure) is extremely severe, with unlimited joint and several liability, and it is not required to control the start-up company, but to squeeze out all the assets of the entrepreneur and his family partners and other relevant personnel; When the entrepreneur has doubts, the "investor" will say that this is the industry rule, and encourage the entrepreneur to complete the performance gambling relatively easily, even if it cannot be completed, the investor will negotiate with the entrepreneur, which is the "industry rule"; Once the entrepreneur signs the contract, the unlimited joint and several liability is hooped, and the "investor" will deliberately delay the time to pay the investment money, more often than not, it is a small amount of money invested first, which means that the contract takes effect, and the rest of the money will be delayed, and the startup company must be dragged to death; Moreover, during this period, because of the constraints of the "investment agreement", entrepreneurs could not find other formal investors, so they could only be tricked deeper and deeper, and finally could not pull out!
d) This kind of "routine loan investment", whoever wants it will die! A big no-no for entrepreneurs! Even if you go to court, there is a high probability that you will fail, because there are too many routines of "routine loans", and startups can't afford to take that long!
3. Unlimited joint and several liability.
a) In the past few years, many entrepreneurs will sign "unlimited joint and several liability" in the financing process, which deeply binds the entire family and family to the start-up company, which is extremely risky. Because of this, there are not a few people who have broken their families and committed suicide by jumping off buildings.
b) In recent years, more and more entrepreneurs have realized this super risk and consciously separated the company from the individual (family)! Also aware of this trend, Shenzhen has introduced a personal bankruptcy law.
c) I have always suggested that entrepreneurs do not need to sign any investment agreement with unlimited joint and several liability! It is better to fail this time to start a business, but also to leave a little fire for yourself and your family, and have a chance to make a comeback next time; However, once the "unlimited joint and several liability" is signed, if the gambling task is not completed, it basically means that the entire family is destroyed, and it is difficult to raise the capital to start a business again!
Second, there is some money to be asked for
1. Angel investment.
a) Most angel investment money can be sought.
b) Because the vast majority of angel investors are acquaintances, relatives, friends, fellow countrymen, classmates, colleagues, etc., and angel investors often only want to do shares and do not participate in the operation, even if the business fails, they will not find the entrepreneur to "claim". This is a natural "affinity" and "support", and entrepreneurs can vigorously win it!
2. Investment in the tuyere.
a) Startups are on the cusp of the industry, and all kinds of investments are pouring in. At this time, what entrepreneurs have to do is: reduce the valuation (compared with peers), loose terms (loose terms of VAM, no unlimited joint and several liability, try not to give a veto), and get money quickly!
b) The epidemic time of each outlet is very short, generally 1-3 years. Investment and financing, from the earliest contact to due diligence, to signing, to the arrival of investment funds, is generally more than 6-12 months;Therefore, if entrepreneurs want to find more investment on the tuyere, they need to "sooner rather than later", and start first!Some entrepreneurs can even raise 2-3 rounds or more in a row during the tuyere period.
c) Invest more in the tuyere, preferring to have a lower valuation;Reserve more cash, because the tuyere will soon pass, once the tuyere passes, it is the industry "involution", the era of big fish eating big fish has arrived, at this time "rich is the uncle"!
3. During the rising period of start-up companies, take the initiative to find door-to-door investment.
a) This unsolicited investment is warmly welcomed. Similar to the investment on the tuyere, what entrepreneurs need to do is: appropriately reduce the valuation (so that the later financing can raise the valuation every time, which is cost-effective for the startup company and various investors, and it is easy for the entrepreneur to complete the VAM agreement;).As long as the valuation is raised, the VAM task is completed), loose terms, and quick money.
b) Entrepreneurs can dilute their shares less per round, such as about 5%, raise funds several times, and the valuation will increase one after anotherWe all share the same interests.
Third, some money, depending on the conditions!
More investment in startups is somewhere between "what to do" and "what not to do". This part of the money, depending on the conditions!
1. VAM Clause. Entrepreneurs need to assess whether they can complete the VAM clause within the specified timeThis is true whether it is a listing, a valuation, or a performance.
2. Unlimited joint and several liability. If there is a clause of unlimited joint and several liability, it is not recommended for entrepreneurs.
3. Repurchase or equity change clauses. Predict whether the investor is a strategic investment or a financial investment, and how much price can the startup company and entrepreneur accept
4. One-vote veto. Depending on the total amount of investment, the proportion of shares, and the claims of the investor, the entrepreneur needs to carefully evaluate.
5. How many installments will the investment funds arrive?Are there any additional requirements, such as how much performance you have achieved to pay the second instalment of the investment, etc.
6. If it is an aggressive investment, the investor requires the start-up company to operate at a loss, how long can the investment funds support the company?If there is no new money coming in later, how to deal with the aftermath?If the loss continues, does the startup have to pay for the investor's loss-making strategy?
7. What is the self-hematopoietic function of the startup? Is it necessary to invest this money? Without this investment money, the startup would have gone out of business? Or is there another way to save yourself? This is also a test of the extent to which entrepreneurs choose to invest!
To sum up: 1. Self-strength is really strong!
2. Look at the trend and prepare more funds during the rising period and the tuyere period; Reserve cash in advance during the cold winter season and prepare for a tough battle!
3. Confirm the terms of the investment. Each round of valuation can be lowered, but the terms of the VAM should be more lenient, and do not sign unlimited joint and several liability!