Point Blank: Mind The Money Monsters
You think your startup problems are all gone when you get the bigger money but you may be very very wrong. There are a number of beasts lurking on the journey ahead!
These monsters are let loose as soon as the deal is agreed on. And believe me this process is more torturous than an MRI and X-ray and CAT scan and biopsy as well as a bone marrow sample all rolled into one. For a simple reason. The people employed to do the due diligence are (I think) paid per question they ask. So they go on and on and on raising queries. On your vendor agreements. Your taxes. Your expenses. Your ROC procedures. Your blood group. Your ear hair. Your tattoos. Thus the golden rule is if you think that due diligence is going to take two months, add two more. If you think your blood pressure is going to shoot to 100 — just plan on 185!
Have you ever read a full-blown funding contract. It’s quicker and far more informative to read the Mahabharata. There’s pages and pages of scary legal text with phrases like ‘deemed without prejudice’ and ‘inter alia force majeure’ and loads of other stuff. Often you’re so much in a hurry to get your money you go through it quickly or ignore the advice of a lawyer. Be careful about this. The difference between ‘monthly dashboard’ and ‘quarterly review’ can cost you lots and lots of pain if they are not properly defined.
Sometime back rich guys who retired used to play golf. Now they play mentors. It’s a much more fun game for them because there is a bunch of young cool people who have to listen to them and feed their ego. Unfortunately, very few of these have actually been entrepreneurs — some have been in a bank or corporate firm their whole life. As a result they know as much about building a business as a donkey knows about wine tasting!
Number And Dumber
These are people only interested in numbers. Do you know if it costs Rs 1.4 or Rs 1.41 to get a customer? Why is there a 0.04 per cent variance in the reconciliation? What are you going to earn in month 3 of Q2… 3,000 days from now? Why isn’t your cash runway dashboard ready? Have you filled in the three progressive business templates? They actually couldn’t be bothered whether you sell oranges, apples or gunpowder. Or whether your site is sexychat.com or oldageorphanage.in — all that matters is 1,2,3 and maybe 4!
This is a very dangerous monster — because he or she is a ‘switcher’ — they begin very nice and slowly turn evil. Whenever your funding is in two tranches you come across this fellow — who may not even be too high up in the VC company. When the funding begins TTs are very sweet and friendly and drink gin and lime with you. However as you move forward they start growing nostril hair, their eyes start turning red, they howl after dark — as they slowly turn into a werewolf. Or a demon whose ego needs to be fed — and no amount of pampering is enough. Getting the second tranche out of them is like squeezing blood from stone!
Money money money — the side effects are many!