A Founder's Advice on How to Choose Investors

An article we liked from Thought Leader Napala Pratini of Habitual:

Seed investors: the good, the bad and the ugly, from a founder who’s been there

Healthtech founder Napala Pratini spoke to 100 angels and seed-stage VCs across Europe and the US. She dishes the good, bad and the ugly.

In the last two years, my cofounder and I have gone from only dreaming about raising money from investors to running the process — three separate times.

Our angel, pre-seed and seed rounds came virtually one after the next, which means we’ve had the (sometimes dubious) pleasure of speaking with no fewer than 100 angels and seed-stage VCs across the UK, Europe and the US.

Some were higher quality than others. By high quality, we mean an investor who comes across as someone founders would want to work with, rather than just a source of capital. Here’s what we’ve learned about spotting them.

They have operational experience

Coming from San Francisco, I had come to expect investors to be ex-operators. But in the UK I quickly learned that most investors had never worked at a startup (only 8%, versus 60% of US investors). It wasn’t until we started fundraising that I realised the actual impact of having investors who had done it before.

While the typical investment banker-turned-VC tended to drill us on numbers (which, frankly, at the pre-seed and seed stage don’t mean all that much) and personal connections (“[insert portfolio company] got around [insert challenge] because they knew [impressive person]”), ex-operators focused more on our personalities, how we approached problems and our track record of execution.

“While the typical investment banker-turned-VC tended to drill us on numbers, ex-operators focused more on our personalities”

Now that we have a cap table full of people who have been in our shoes, it’s really obvious why this experience makes such a difference. They bring not only invaluable firsthand experience, but also an empathy for the ups and downs of the journey that translates to positive rather than antagonistic relationships.

They involve associates in the process

There are varying opinions when it comes to how to handle VC associates — one of the strongest coming from Paul Graham, who in sum suggests you never take a call with one. It’s an opinion I often hear repeated by other founders.

But we’ve found this to be a limited view. Associates from all three of our VC investors were deeply...