Founder First — Talk v/s Walk
All VCs claim to be “founder first”. On the other hand, Vinod Khosla says 80% of investors add negative value.
How do we make sense of this contradiction?
As a founder, you’ll interact with investors across three stages: when you’re pitching to them, while negotiating deal terms, and after they’ve invested. Each stage reveals something different.
Pitching
After a few weeks of pitching, most founders quickly notice the gap between what investors say and what they actually do. The important thing is to not get jaded — run fundraising like a sales process and keep moving.
At this stage, the clearest tell is transparency and promptness in communication.
- If they’re genuinely interested, they’ll try to move forward as quickly as possible — no exceptions. They’ll tell you what they want to cover in follow-up discussions and where they are in their decision-making.
- If they’re slow, it usually means they don’t have enough conviction. Those who ghost? Don’t bother.
- The worst are those who keep engaging promptly but keep asking for more data or scheduling more calls without any clarity on when — or whether — they’ll make a decision.
Getting an offer is the successful conclusion to pitching — and an exciting moment. You’ve found investors who share your vision.
Closing
Before the partnership truly begins, you and the investor will briefly be on opposite sides of the table. Here, watch for whether they’re genuinely trying to find something that works for both sides — or just for themselves.
Since they are putting in money, they want terms which ensure their capital is used well and that founders remain aligned with the startup. That’s reasonable.
Any reputable investor will offer market-standard terms. They might be slightly strict on some things and lenient on others — everyone has their preferences — but the overall deal will be fundamentally fair. The better ones will also explain their rationale: why a particular term is there, what they’re trying to protect.
So it helps to know what market-standard looks like. Talk to founder friends who’ve raised recently, and there’s plenty of material online. As you move down the investor quality curve, the terms tend to get worse. Founders raising from them often didn’t get offers from better investors — which means there’s less pressure on them to be competitive.
Some red flags to watch for:
- Advisory equity or a lower price than what other investors are getting
- Board seat despite being a small investor
- Reserved matters that cover day-to-day operational decisions
- Founder vesting or lock-in longer than the expected exit period
- Liquidation preference above 1x, or any guaranteed return mechanism
- Excessive ownership or dilution demands
The underlying principle is simple: the startup’s success is the shared priority. Whenever an investor is structuring terms that serve their interests at the startup’s expense, that’s a problem.
Closing logistics
In India, closing a fundraise is operationally heavy — multiple investors, commercial negotiations, drafting and redrafting, legal filings. It takes time even when everything goes smoothly.
The best investors guide you through it with one goal: get the money to you as fast as possible. They work with defined turnaround times, proactively help manage the moving parts, and flag any constraints on their end — like wiring timelines — upfront.
Others will drag out documentation, reopen commercial negotiations, or extend diligence well beyond what’s necessary. This kills momentum at exactly the wrong time.
Portfolio
Now they have a vested interest in the startup’s success. But the problem is that good intentions can still produce counter-productive behaviour. Time and again, founders learn this the hard way:
- Being fussy about approving founder compensation or key hires
- Asking for detailed business plans and annual projections when not needed
- Long brainstorming sessions to influence the future direction of the business
- Blaming and pressurising when things aren’t going well
On the flip side, here’s the value that good investors genuinely add:
- Help with the next fundraise — giving feedback on the deck and data room, making introductions, championing the company
- Limited, focused interactions; they value founders’ time more than their own — any suggestions or questions are grounded in reality
- Giving space to execute, while holding founders accountable on progress — which can mean difficult conversations
I think the single most valuable thing any investor can do for their portfolio company is help them raise the next round. Everything else is marginal.
Before you ask...
Should you raise on bad terms?
Startups are extremely risky anyway, and poor terms make things even harder. If capital is absolutely essential, negotiate hard — terms can be stringent and still be fair. If you can find a way to do without capital for now, or can wait, that’s worth considering. If you have no choice but to accept, at least protect your own interests as well as you can.
How do you figure out how different investors actually operate?
Ref checks. As conversations get more serious, talk to founder friends and ask about the investor. Two groups are the most useful: portfolio founders, and founders who were declined even after deep diligence. You’ll get mixed feedback on most investors — so look for specific, concrete examples rather than general impressions.
How do you keep investors from meddling too much?
The best founders I know lead the relationship with their investors rather than letting investors lead it. This gives founders control and gives investors confidence. Set clear expectations and boundaries early, be proactive in communication, and recognise that different investors need to be handled differently.