This article originally appeared in the Harvard Business Review
A friend called me heartbroken, crying. She had spent months looking for investors to fund her fledgling startup and now she had a big problem. Someone was ready to give her the money.
Trouble was, the cash came with a catch. The only investor willing to pony-up the money was someone she didn’t like. She also got the feeling he did not like her much either, and yet, he wanted to invest. “If he was involved, I have the feeling I would quit my company down the road,” she told me over the phone.
Time was running out, she needed the funds and with no other investor ready to commit, she feared she’d have to take the money from someone she couldn’t stand. The very thought made her sick in the stomach.
I felt for her and her dilemma piqued my curiosity. What differentiates a great early-stage investor from someone no entrepreneur wants to take money from unless they absolutely have to? I wanted to know what separated angel investors — those who add value to a company — from devil investors — those who destroy it.
Last month, famed investor and Sun Microsystems co-founder, Vinod Khosla, shocked a tech conference audience claiming, “… 95 percent of VCs add zero value. I would bet that 70-80 percent add negative value to a startup in their advising.” Can Khosla be right? Can investors be a liability rather than an asset?