Cashflow is a basic survival metric for every startup. Investors check your burn rate to assess your efficiency, and project your remaining runway before you run out of money and into a brick wall. Don’t wait until you are almost out of cash before managing every dollar spent, or looking for the next refueling from investors. Desperate entrepreneurs lose their leverage and die young.
Even though the color of their money is always green, all startup investors are not the same. Struggling entrepreneurs are often so happy to get a funding offer that they neglect the recommended reverse due diligence on the investors.
I can’t tell you how many times I’ve walked away from deals where the entrepreneur insists on a start-up premoney valuation that is so high, no angel could expect to make a return upon the investment, even with a reasonable sales price for the company down the road.
Investment management is a complex process that, if performed badly, can have a negative impact on the sentiment of your investors towards your company as a whole but, if done well, can make a huge difference to the overall perception of investments.
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