Raising VC with Checked Past?
Throw away account for obvious reasons.
I started building an AI first software company about 3 years ago, and it looks like we hit it.
We've got a strong-albeit-small team, a not so small group of happy customers paying us real money every month, and a defensible niche with a clear path to a very large market.
I'm ready to raise VC money, but I have something of a checkered past.
We.dont need to get into details but I'm something of a pariah in many parts of the industry, and I'm worried that once the VCs do some digging, the conversation will be over before it starts.
Anyone have anything for me?
Hard to opine without knowing the details and magnitude of what your "checkered" past is. Although VCs are generally forgiving of past failures if your new company is a rocketship, there are obviously some things that cannot be looked past, like if you have a criminal record, sexually harassed anyone, etc. I'm not sure what kind of advice you're looking for. If you have a checkered past, it will 100% be discovered - VCs are much more intense nowadays on background checks & diligence + reference checking after blowups like FTX. Might as well address it head on.
Yeah I had some mental health problems for a few years, which led to a series of blunders, including:
Making a hateful remark and getting pushed out of the marquee company in the industry (lots of bad blood here)
Making a lewd comment about an attractive coworker and getting called out publicly for it (smaller company). I quit this job and burned all the bridges.
Getting fired two weeks into my next job for embarassing the CEO at quarterly kickoff.
quitting my next job extremely abruptly and dumping all of my gear on my bosses desk (at midnight, no one was around) on the way out the door after spending 9 months underperforming.
the next job I worked for a little over a year and ended up negotiating an exit package with my lawyer and the HR department over issues with my boss.
SInce that last incident (5 years ago) I cleaned my act up and performed well, so everyone who I've met since likes and will vouch for me.
To be totally honest, but this doesn't look good. The fact that there's a long history of behavioral issues across multiple companies, is a huge red flag. If it's been 5 years and you have really cleaned up since then, maybe you can show this was a while back and you've taken the right steps to take care of yourself. But this doesn't read well at all, especially since it's multiple incidents over time. This shows a pattern of bad behavior, not just a one off incident.
Thank you for being open and sharing this with us.
Our VC investments also come with reference checks in previous companies and this would come to light then. VCs have a very large network and know people everywhere. The startup ecosystem is a bunch of people who run into each other all the time. This is also why staff interviews aren't always senior people, sometimes we even speak to analysts or support staff to figure out the culture and potential red flags.
The behavior stated above is difficult for a person who is leading a company. If it was a condition which was dealt with/healed, then maybe it would present a better outlook. But some of the lines you wrote out are very hard to read for an investor who is trusting you with an investment, but also with the people, clients and the market around you.
In a world were corporate social responsibility means a variety of aspects, some people might be concerned with you at the helm. At the end of the day, if the company is performing well and you have yourself under control ("you grew up") - maybe they will be able to put this aside.
what does this even mean?
You went to prison? You defrauded someone? Your tech/proposed tech didn't work and you knew it?
we normally check /w founders, co-founders, ..:
- criminal background check
- origin of funds
- sanctions
- nationality / work permit (we had a founder who was undocumented in the US)
- previous instances of fraud, misappropriation, bankruptcies, ..
within the company:
- ongoing litigation, especially sexual/discriminatory, ..
- number of staff dismissals
- employee handbook (to be honest, most startups have really good ones)
- compliance within HR
- staff interviews (selected key staff only)
(and more)
There are some niches that are "morally or ethically questionable" and this is a tough one. Like, we had a tech company that was compliant with everything, but they had a problem with adult content within their services. With AI companies there might be the question whether the training model is ethical or correct, or in which industries it is used?
But only you can tell us more details here...
How did you manage to build such a successful company with a checkered past? What was your background?
I did tours of duty in engineering and sales, so I understand both the technology and the business
On the checkered past side, people like to think of "tech" as one big industry, but it's really dozens of industries with dozens of sub industries, and dozens of sub sub industries.
For example, there is software as a service (SaaS), and within SaaS there is Customer Relationship Management (CRM), and within CRM there is enterprise and SMB, and then there are vertical specific CRMs (life sciences, car dealerships, luxury goods, etc.)
If you're a smart generalist, you can pick something unsexy and fly under the radar until you get to a certain scale.
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