Investor shenanigans

What happened when we let founders anonymously vent about investors

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Hello there,

This August we’re shining a light on parts of the early-stage UK startup ecosystem that often don’t get written about.

So far we’ve looked at dealmakers and pre-seed due diligence. Today, we look at a sensitive topic. How founders feel about investors and the fundraising experience.

If you’re an investor (and there are plenty who read PreSeed Now!) you might find today’s edition painful reading. But as we gear up to resume our twice-weekly profiles of startups at the beginning of September, think of this as a useful palate-cleanser.

I’d love to hear from investors with their thoughts on what founders have to say in today’s edition. Please feel free to drop me a line with your thoughts.

But first:

  • Hello if you discovered us via’s syndication of last week’s due diligence piece. It was good to get a byline over there after years as a reader.

  • Don’t forget, paying subscribers to PreSeed Now not only get the full versions of all our startup profiles, they get access to our Startup Tracker. It keeps you informed about the progress of 100+ early-stage B2B and deep tech startups across the UK.

– Martin

What happened when we let founders anonymously vent about investors

Over the years, far too many founders have quietly shared stories with me about how an investor screwed them over.

These tales generally don’t become widely known, because founders don’t want to rock the boat too much. And for anyone not directly involved in the deal, it’s impossible to know which specific stories are simply a result of crossed wires or sour grapes, and which are genuinely bad behaviour.

Earlier this year PreSeed Now held a round-table event in which we heard about how 2023 is very much an investor’s market as funding activity slows down across the board.

While there will always be some investors who take advantage of startups, is founder-unfriendly behaviour on the rise in a market where startups often have fewer funding options?

It’s difficult to say for sure, but anecdotally, we’re hearing about increasing numbers really harsh term sheets out there at the moment. From our experience here at PreSeed Now, it seems like antics that had been on the decline pre-Covid are now truly back in play.

One example we’ve heard from a number of different people: some investors wanting to give themselves 60- or 90-day cooling off periods. If they decide to walk away, they keep their money and [get ready… this is wild…] rights to the startup’s IP. Seriously.

That’s just one particularly bad story that–while we haven’t seen a term sheet to confirm it–has come up in a number of conversations lately and sets the tone for how some founders feel about the current investment landscape.

And it came up again when I contacted a bunch of founders and gave them the opportunity to vent about current and recent fundraising.

A quick note about valuations

Before we dive in, it’s important to note that one area where investors can legitimately become more hard-line in today’s economy is around startup valuations.

As Rupert Wingate-Saul, who runs Founder Funding Groups to help startups raise, told me:

“Valuation of all of these businesses is typically very subjective, and it's in the eye of the beholder. The founders have one view, and the investors often have another.

“There are of course levels below which that negotiation is harmful, at the point they're taking up such a chunk on the cap table that it makes it difficult for the business to raise any follow on funding. But assuming you stay above those levels, I think negotiation on prices is certainly the investors right and, and is often healthy.”

So valuations are one thing, but let’s look beyond that and see what founders have to say about the broader fundraising experience.

All quotes below are from early-stage startup founders who are either raising or have recently raised funding; often their first round.

We’ve given them anonymity so they can speak freely. Some of the quotes have been paraphrased for clarity or to better obscure the founder’s identity.

Poor communication

  • “Most investors won't say no to a team they don't like. They'll often string founders along in case they get interest from other funds - herd mentality is strong in investors, and any signal that another fund is interested often triggers interest from others. Until then, investors don't like to rule anyone out.”