15 years ago after the funding I'd arranged to start a company fell through after about a year of travelling to raise it...we finally went to a VC. He insisted that he could not sign an NDA because of the precarious position it put him in hearing so many of these pitches. At that point we figured, this was basically our last option anyway so we gave him the pitch.
He really liked it and wanted a local company to build it that we weren't comfortable with, so we parted ways.
5 years later I found out he had the company build it about as well as he could from memory of our pitch. It had plenty of flaws but it was a company that ended up selling for several million. As far as I can tell, it was re-sold and the company had a complete shift of focus afterwards.
Meanwhile, in NY 2 years after my meeting with the VC an enterprising group of people who were not affiliated with that VC at all pursued and built a business out of one of the core features of my original platform. As it turned out, that feature stood as a business on it's own. I'd included it in the overall system because as an integrated feature, it facilitated a lot of efficiency gains.
My platform was a comprehensive information system for public schools designed to make it easier for teacher's to focus on their students, reduce their workload and make it easier for them to communicate directly with parents. As a part of that system, there was to be a market place for teachers to sell and exchange lesson plans. This was back in 2003 and now smaller companies have popped up doing various parts of what our original plan was for.
In NYC, Teachers Pay Teachers has made a business out of that aspect and for what it's worth, I'm really happy that they have been successful.
The whole experience was really eye opening and I've been extremely reluctant to pursue funding for any of my business ideas because of it. I wish that wasn't the case.
A couple months later our founder has another possible investor and we go through a Due Diligence again. This time we were already wary from our first DD (plus the investor had a bit of a reputation of being a scammer in the past) and lo and behold their IT guy wants to have full access to our software packages / pipeline, source code and databases, so they "can assess the quality". (...) I didn't end up giving them any of our source code, which they were fine with after a while. This whole spiel went on for another month where they "focused" more on other processes. Eventually they went quiet and their CTO asked me privately if I wanted to jump ship to join them, because they need someone with my expertise...
Does this happen often or did we just have some bad luck? Also has anyone ever been asked to provide the source code to their product? (that seemed kind of outrageous to me)
Plus I think a write-up of guide lines or red flags that one should watch out for during a DD or when talking to a VC might help more than just name calling. What worked the last time: Google their names and go past page 1 (Most seem to know how to alter their search results)
That's just one sided. They can steal your ideas (because they didn't signed the relevant NDA), and you can't even name the bastards if they do?
I have zero experience in this stuff, but it looks like in this situation, one should either refuse to sign this sort of non-disparagement clause, or have them sign the relevant NDA.
We've had our own little revenge though. The competitor is funded well but has a very weak technical team. We used numerous holes in their systems to obtain critical data about their business. Shall we use it or not is another moral question, but it gave us great insights and let us adjust our strategy without spending our own or VC's money and time on getting to know it.
Did the platform you built attempt to create a shared curriculum libraries? If so, was the focus on the school, district or national scale?
Happy to take a response via email so as not to derail the thread (see profile).
It's a topic of personal interest. I believe teachers are far too isolated in their lesson planning/curriculum creation which leads to significant redundancies in labor, glacial curriculum improvement, and contributes to the difficulty serving the needs of my individual students.
I may publish the business plan one day just for fun in case anyone else wants to follow through on it. :)
I'm not sure we ever got a VC to give us one of these waffling "no"'s without apply serious pressure.
I've known people who claimed to be from a VC fund that had $10MM raise out of $50MM and was making investments.
In reality they had no money raised but signed $11.5MM in investments with startups.
It's a crazy world out there. Vet your investors.
They thought they could raise the money once they had the portfolio.
I'd wager approximately zero. There is more to the above story. As described, these VC's wasted tons of their own time. How did they even have offices?
An example: say you acquire a company worth $10m and have no money in the bank. You could pay 50% of it in stock ("you'll be part of an amazing growth story, and the $5m stock you get today will be worth $50m in 5 to 10 years") and then go borrow $5m from a bank (or go through an equity investor) to fund the other 50% of the acquisition price. But often you'll need a binding LoI to get a loan.
Doesn't always work, but if you're someone who is well connected then it's quite doable. I've seen it done.
Another person that comes to mind is David Baazov: https://www.forbes.com/sites/nathanvardi/2014/12/01/the-king.... He aligned things well and put deals together, and ended up making a ton of money because of it.
Perhaps these VCs were expecting money to come in but in the end their fund fell apart?
OP said "had no money raised but signed $11.5MM in investments with startups". maybe they mispoke.
Was going to comment on the article itself: You shouldn't walk away from a VC without this in hand. Kind of a general sales concept - never take "no" without a good reason.
If you give a specific reason, they will challenge it.
"No, I don't want this product, because I'm not interested."
"I'd like to cancel this credit card, because I don't want to have this credit card anymore."
http://jamesclear.com/copy-machine-study
Of course a salesman is more likely to push back than a random bystander, whatever reason you give.
That being said, I'm not a telemarketer, I work with high end Integrations and before you get a proposal we've had a few conversations. If the answer is no, I'm respectful of that and I want to know what we can do better next time.
I'll keep following up until I've gotten an answer.
> When you get a wire or a check. That's the only way.
YES to this.
Don't you mean "without specific reasoning/metrics behind them"?
> Almost immediate and right to the point that they wouldn't invest, with specific reasoning/metrics behind them.
I did some searching now and it seems that intent to deceive/defraud is required at least in some states. Common sense would say you wouldn't get any company shares or other things until your check clears, so if it bounces, is it actually fraud? Or just being a jerk?
That's quite an extreme mischaracterization.
It is VERY unlikely that you are going to be arrested for bouncing a single $50 check.
Generally the people who get arrested for bouncing a check have something extra on top of it. They immediately sold the purchase (so it can't be reversed). They have bounced many checks up to this point (you mentioned repeat offenders). etc.
There is genuine injustice in being poor. That "bounced check charge" disproportionately hits the poor. And banks were going out of their way to reorder transactions to make things bounce. Parking fines, usage fees, etc. all are meant to tax the poor.
However, even multiple bounced checks are unlikely to result in prosecution without something to add to the pile.
Incidentally, some time ago, I used Bank of America. I had about $300 in my checking account. I made about $300 in purchases for the month, like groceries and gas and this kind of thing. Then, something happened with the car, and I had to take it in to the shop. They could fix it for $250. I knew I didn't have it, but I decided I was willing to pay the overdraft fee (of $35) in order to get my car fixed, since... I needed a working car. Anyway, I made the charge on my card. Then, the next day, when all those charges posted, Bank of America rearranged the order of my posts so that the $250 charge went on the account first, and then charged me about ten $35 overdraft fees. They rearranged the post order so the largest transactions went first. Anyway, scumbag banks aside, they were actually sued for this in a class action, but through some "miracle" for the bank (a shredder), they "lost" all of their records for that year, including my $350 in overdraft fees that they charged me. So I wasn't able to get my money back even years later. Class actions are total ripoffs.
I think all cases of writing a check you know isn't covered is fraud. The cases when you thought it would be covered but you were mistaken are difficult to judge, need to prove what you knew when.
The worst No's are the ones where they ask to do Due Diligence and then never open the dropbox folder. Or if you are on your fifth meeting and they just keep trying to pump you for competitive information.
So how do you know when you get a Yes?
When you get a wire or a check. That's the only way.
Even a signed note or Equity docs don't mean anything until that money clears.
The best No's I've had were from Bessemer and a16z years ago. Almost immediate and right to the point that they wouldn't invest, with specific reasoning/metrics behind them. A++ would get told no again.