For an extended period, I have delved into the intricate dynamics between local investors and Egyptian entrepreneurs, gaining insights that warrant careful consideration.
In the current business landscape, the professional and empowering support entrepreneurs ideally should receive from investors has become a scarce commodity. While transparency and genuine partnership challenges are disheartening, it is crucial to recognize these issues as opportunities for positive change.
As entrepreneurs navigate these challenging times, exercising caution in selecting investors becomes crucial. To my fellow founders, I offer advice: exercise caution when considering funding from entities, TV shows, and angel investors whose actions may lack the transparency necessary for a healthy partnership. Be vigilant of red flags like overly aggressive negotiation tactics, ambiguous contract language, and offering money in return for a trust bond – an incriminating practice that can personally hold the founder liable, potentially leading to legal consequences. Money into a startup should be through a bank transfer from one company to another after negotiating and signing contracts. Borrowing against incriminating documents can resemble unethical practices reminiscent of loan sharks.
Additionally, be cautious of delayed contracts and term sheets, as these may challenge your growth.
Are you in talks with an Investor or a Raider?
In their most authentic form, investors are individuals or entities seeking a win-win situation. They aim to empower founders, contributing capital, expertise, and networks. Conversely, some entities engage in practices resembling predatory behavior, prioritizing short-term gains over the venture's long-term success.
Investors: Empowering Partners
Genuine investors understand that success is a shared journey. They actively contribute to the growth of the businesses they invest in, fostering an environment where both parties thrive. Their commitment goes beyond monetary transactions; it involves mentorship, guidance, and a sincere interest in the founder's success. They become your empowering partners.
Raiders: Enslaving Masters
Some entities and individuals, however, may prioritize short-term gains and employ tactics that exploit vulnerabilities. These can include imposing unfavorable terms, pressuring founders into decisions, and lacking the commitment to long-term success. Identifying such challenges is crucial for founders seeking a sustainable and mutually beneficial partnership.
Beware the Disguised Raiders
The most challenging aspect is identifying entities and individuals that may initially seem genuine but reveal their true intentions through actions.
Here are some of the things you should look for:
A common factor observed repeatedly is the attempt to gradually turn a startup into a department in an existing company and the founder into a manager of a dependent profit center and not a separate entity. Another tactic is to delay contract signing without changing the amount of invested funds in Egyptian pounds, often driven by currency arbitrage and, in other words, getting the same stake in the startup for less.
Dear founders, you deserve much better. Always do your homework on your investors before you even meet them. Understand what you are getting into, no matter how famous or reputable they are. The choice between investors and raiders is pivotal to your startup's well-being in this coming period. Make smart, well-researched choices. Look for the red flags.
Our founders deserve the best support possible. They deserve proper guidance and genuine partnership from investors. They are meeting unimaginable challenges. Let us not add to them with predatory actions.
Goodwill and Respect