Venture Capital/Analysis/ ‘You must have very understanding husbands’: Founders share their VC horror stories From discrimination to meeting no-shows and ghosting, startup founders tell Sifted about their worst investor experiences By Kai Nicol-Schwarz 22 April 2022 \Venture Capital Hoxton Ventures to add a new partner in April By Amy Lewin 17 February 2023 Venture Capital/Analysis/ ‘You must have very understanding husbands’: Founders share their VC horror stories From discrimination to meeting no-shows and ghosting, startup founders tell Sifted about their worst investor experiences By Kai Nicol-Schwarz 22 April 2022 “The VC turned up late to the meeting, asked no questions, explained nothing about the firm or fundraising process and openly yawned eight times,” a serial fintech founder tells us. Think this sounds like an isolated incident? Think again. We recently asked Sifted readers to share their experiences of investors behaving badly — and the stories they shared weren’t all that pretty. We heard from 59 people on their VC horror stories: here’s what they had to say. Arrogance and ghosting The vast majority of respondents — over 75% — told Sifted that they had faced arrogant VCs and been ghosted by investors. A number of respondents spoke about VCs not showing up for meetings, and one founder says that the biggest mistake they made while fundraising was continuing to pitch while a VC pretended to fall asleep. “Ghosting is extremely prevalent with VCs,” says a first-time founder; there’s a “lack of respect for a founder’s time”. “If many VCs treated LPs the way they treated founders they’d never raise another fund,” he adds. Others talked of VCs stringing founders along for weeks on end — sometimes with malicious intent. “After signing a term sheet and completing due diligence,” a serial founder tells Sifted, “a major fund dragged their heels for months during the funding process to run down our cash position. They then attempted to aggressively renegotiate the term sheet.” Discrimination 39% of respondents said they’d faced discrimination — either conscious or unconscious — when raising cash from investors. A female first-time founder was called “silly” by a male VC for focusing on raising from funds with at least one female decision maker. The European VC landscape is notoriously skewed towards men — especially at the top level — and last year a report by the British Venture Capital Association found that just 10% of senior investment roles in Europe were held by women. The same VC “told me to find greedy investors who will make me rich [so] then I could donate to female charities instead”, the founder adds. When she pushed back, the VC went on to say he wouldn’t be “lectured on female empowerment” because he “has four daughters”. Another first-time founder says she faced “gender discrimination due to being a female in a male-dominated industry”, and felt “undervalued” and treated differently to her male cofounder. “For every good experience, there were 10 very shitty ones” She tells Sifted there were situations in meetings where eye contact was only made with the male cofounder, despite her being the CEO. But first-time entrepreneurs aren’t the only ones on the receiving end of VC misogyny. A serial founder tells Sifted that when she and her cofounder were pitching to a male VC, he commented: “Wow — you must have very understanding husbands.” A Black respondent says she faced “sexual overtures [and] racist microagressions” and wasn’t taken seriously as a founder despite having six years experience building companies and an exit under her belt. Others tell Sifted that the barriers to gaining VC funding for people from underrepresented groups and communities are still high because it’s “a white, cisgender, heteronormative old boys’ club”. Likewise, one female first-time founder says that some VCs she dealt with were “classist and sexist” and “evidently only looking for a single type of person”. It wasn’t all bad, she adds, but “for every good experience, there were 10 very shitty ones”. Improving the situation More than two thirds of respondents tell Sifted that diversifying the investor pool and managing biases would make the VC experience for founders better. “Having diversity among the investing community would go a long way,” says one. “There is diversity at the lower levels, but unfortunately that has yet to filter up to the top levels that actually call the shots.” According to the British Venture Capital Association report, just 3% of people working in European VC and PE are Black, while 11% are Asian. Another founder tells Sifted that the lack of investors from underrepresented communities creates a “negative feedback loop”. “[Entrepreneurs from underrepresented communities] raise less money at lower valuations,” they say, “which hampers their ultimate success, which in turn makes these types of founders look less backable.” Between 2009 and 2019, one report found that just 0.24% of venture capital in the UK went to teams of Black entrepreneurs. Others feel VCs that need to get better at communicating when they’re not interested in a deal. “The worst VCs are those who decline after three meetings, give you a bullshit reason like ‘it’s a bit too early for us’ — which they could basically tell me after the first meeting,” says one founder. “Best advice I ever received from my chair was to reduce your expectations of VCs to zero, then you will be pleasantly surprised from time to time’” A straight “no” is the second best outcome for a founder, says another. “The worst is being ghosted as you hold out hope.” While founders shouldn’t expect a smooth ride the whole time, investors delaying making a decision on a startup can be “very dangerous” for entrepreneurs, a first-time founder tells Sifted. “Sure you need to kiss frogs, but there are limits,” he adds. “When you’re never going to be more than a frog — let us know.” The mistakes to avoid We also asked respondents about the biggest mistake they made while fundraising. Letting investors draw out the decision making process for too long was one of the most common answers. One founder says their team should’ve asked what investors’ processes were and how long it would take. “Many investors in Europe drag you through a multistep process speaking to the entire team, only to reject you on something basic which could have been addressed upfront.” Likewise, “holding out hope on a VC that went quiet after multiple meetings that we perceived to be positive” was the biggest mistake another first-time founder thinks they made. Others say they spent too much time in meetings with VCs, and jumping on every opportunity that presented itself meant they had less time to spend building the business. “Sure you need to kiss frogs, but there are limits. When you’re never going to be more than a frog — let us know” Post-fundraise, a serial founder tells Sifted that “expecting VCs to add value beyond capital” was the biggest mistake he made. “Best advice I ever received from my chair was ‘reduce your expectations of VCs to zero, then you will be pleasantly surprised from time to time’,” he adds. One first-time founder has a cautionary tale for founders desperate to snap up investors’ cash. He tells Sifted that “taking the wrong investors’ money” was the worst error he made. “Dumb money comes back to bite you in later stages,” he adds. What founders told us “If you must raise a round, really do your due diligence and ask around what each investor is like. Work to build a network of warm intros and don’t approach [investors] until you have done that. Cold intros don’t work and put you in harm’s way. If you really want a VC win, you can partner with a man or two for your pitchdeck, but don’t be married to either. Also, don’t be pregnant unless you come from a certain financial background and your hubby is already an investor or sold his company before.” First-time founder “Be very clear on the message, opportunity and why you and your team are the ones positioned for success specifically. Never allow an investor to run the process — you run it — and [although it’s] important to be flexible never compromise to a point where you are uncomfortable. Never take anything for granted until you are at signing.” First-time founder “Apart from learning about the fund’s strategy, structure, size, investment thesis etc, really try to dig deeper to understand its culture and its people. There is no point in raising from investors that don’t share your core values.” Serial founder “Bootstrap!” Serial founder “Women need way more time and way more meetings. Don’t listen to second-time male founders raising in the space of a week. You need more time so make sure your runway allows for this.” First-time founder “Take pitch training! Build a great pitch deck and build yourself a network in the VC world six months before you start raising money.” First-time founder “Don’t take it personally. Be persistent. Be yourself.” Serial founder “Really think about what you want the money for and never rule out bootstrapping.” Serial founder “Remember that they are selling to you just as much as you are selling to them.” Serial founder “Do your homework on the funds. Build a list, work up from the bottom, up; make mistakes and refine your pitch based on feedback from funds who are not your preferred investors. Listen, listen and listen to feedback. Don’t take things personally.” Serial founder If you want to hear more on this story, listen to this week’s episode of the Sifted Podcast, where Kai talks about his reporting and our plans for more community journalism based on readers’ experiences. Find it on Spotify and Apple. This was our fourth community survey article, following our look into Sifted readers’ experiences of toxic workplaces, hybrid working and hiring the current market. More venture capital stories We crunch the numbers on European tech’s Q1 How to end the boys’ club in VC Sifted sits down for brunch with Hummingbird VC’s Firat Ileri Why angels need friends more than deals One startup’s rulebook for bootstrapping Kai Nicol-Schwarz is a reporter at Sifted. He covers healthtech and community journalism, and tweets from @NicolSchwarzK. 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