An investor’s behavior, interests, and incentives change quite drastically pre- and post-investment. When an investor has decided to invest, he or she will be in full sales mode. This is what’s known as the “courtship phase.” During this time, you feel like Cinderella. The spotlight is on you, you’re treated like a VIP, and it all seems too good to be true. Well, many times it is. Investors’ attitudes can change quite drastically after the check has cleared the bank.
The good news is that investors, like entrepreneurs, have reputations and track records. The world of early-stage investors is quite small, so you can usually get a feel for an investor simply by asking around. One of the best ways to understand how a firm treats its investments is to chat with a few of its portfolio companies’ CEOs. Ask if you can take the CEO out to coffee to pick her brains about the investor. Even better, ask the investor to put you in touch with a CEO of one of the investor’s failed companies. You might be surprised by what you hear.
Just like investors do intensive due diligence on you and your company before investing, you should do the same with them. You are committing to a long-term relationship, so you need to know what to expect post-courtship.