3 Unmistakable Signs of a Predatory Investor
The unspoken problem with encouraging more investments in female and minority-owned companies is that it encourages an already ongoing problem in the early-stage universe: predatory male investors targeting startup founders for manipulation/take-over. Women especially get targeted by these bad faith actors and have the most to lose if they fall under their spell. Female founders tend to have less of a safety net if an outsider comes in and Svengalis them into a disastrous, business-ending series of moves.
Here are the 3 unmistakable signs you need to look out for:
- They approach you aggressively even though you’re selling less than $1M annually, often far less. Look, you’re nice and all, but your startup is way too volatile and likely to fail for the most experienced investors to approach you. You should be seeking out angels, family, and friends, not the other way around.
- They immediately pitch their executive backgrounds, but it doesn’t relate to CPG at all. Wait? They wanted to invest, and now they’re talking about running your company for you? In dating, we call this creepy. Don’t fall for it. If an investor doesn’t respect your command of your business, they are a bad faith actor engaged in a take-over attempt.
- They want to talk urgently about doing a deal when no relationship has even started to form. Yeah, this is like the ass-end of house-flipping. You probably do need the money, but the investor’s urgency is designed to prey on your painful cash flow reality and get you to concede a ridiculous amount of equity and/or control. This is what a rich white guy does after reading too many articles about plant-based foods taking off.
Getting control of private companies and engaging in pump-and-dump plays/bets is a well honed dark art for unscrupulous private investors. It’s pretty much the ‘We Buy Ugly Houses’ end of CPG investing. It’s not based on helping you maximize your sweat equity or the long-term existence of the brand. These folks are pure parasites. Toxic parasites.
I blame Shark Tank for encouraging the false notion that ‘investors’ make decisions in five minutes on businesses they’ve barely evaluated. Give me a break. 75% of the televised deals on that show never happen once the Sharks look at the P&L. Stop watching this show, please.
This class of private investor love to target female founders under the assumption that women:
a) don’t really want to operate their own company, and
b) don’t have the ‘experience’ to do it.
Experienced CPG investors in the private markets have people coming to them, because they have a value-added reputation they have worked hard to earn.
My advice? Script out some form replies to the male investor parasites who are headed your way the minute your brand gains any exposure. I guarantee it will happen. Be ready to flick away the parasite with your fingers.