Investing in early stage companies is not unlike getting married -- it follows the same steps. In many cases the time some investors spend in a deal is longer than some people spend staying married. The average length of a marriage today is 8 years. I know many investors who are in deals for ten years or more.
Here’s a comparison between
getting married and investing in a startup.
Marriage Investing
in a Startup
Longing Seeing
others make a profit
Introduction The
entrepreneur pitch
Dating Getting
to know the team
Engagement Due
Diligence
Marriage Ceremony Signing
the terms sheet
Honeymoon Excitement
of joining a new co.
Post-honeymoon Day
to day work on the business
I draw this comparison because I see many investors rushing
through the “dating” process only to find they picked the wrong one.
As an investor you’ll spend quite a bit of time with the
startup over the coming years so you want to check compatibility with the
management team. The key areas to look
for alignment are: hiring people,
managing budget, and building culture. Products
and strategy will change to fit the market and the current business
conditions.
If you’re investing in a startup you’re about to get
married. Make sure you’ve done the
necessary due diligence on the people.
Best regards,
Hall T.
