When you are a startup or entrepreneur, a fresh injection of cash (warning, incoming cliché) can mean the difference between life and death. Businesses shut down every day because of a lack of capital, so why would you ever say no?
For one of our speakers at our special edition at CeBIT this month, the answer is now pretty clear.
Vanessa Ferragut has seen the negative side of investments. Your investors, board members and other Startup Founders are always saying to you “Money, money, money. You need money to survive. So when time comes, you feel responsible to accept any offer.”
Vanessa entered a pitch competition for her company, with an ask of $500k for a 20% stake. Instead, she was offered $100k for 20% while on stage in front of a live studio audience with the cameras rolling. Being able unable to consult with her CFO and developer, both in the audience, she felt the pressure to take the offer. After all, $100k could take far enough to crawl out of a temporary down-round, right?
What followed however, was hardly a fairytale (or it just wouldn’t be Fuckup Nights worthy, now would it?) “They told us they were going to pay us in instalments of $25k, which was fine – so we said ok”
But then the bomb dropped. The VC firm later came back and told Vanessa they were only going to give her $50k, and refused to let her raise the remaining $50k through other sources.
She was stuck.
“I realized after the excitement of having raised a $100k round that i never really did my due diligence on these investors – much like they do on us!”
You can see Vanessa’s full talk this month at CeBIT, the Global Event for Digital Business March 20-24 in Hannover, Germany.