What should I do when investors sign the agreed documents but never funds the agreed investments?

echojason@gmail.com'

JASON LEMKIN

Blame yourself and move on.

Yes, they have a legal obligation to fund you. But what really happened is either:

  • You spooked them. Something came up they didn’t expect, and they don’t want to invest anymore. In this case, you probably breached the reps in the financing agreements (if there are any). Even if you didn’t breach anything contractually, you breached the obligation of disclosure. Or you did something unprofessional. Investors get spooked. Your fault.

or

  • You picked an unsophisticated/nonstandard/nonprofessional investor. That’s OK. All money is green. But these guys pull out of deals for many reasons.

Get over it, move on. You picked wrong, or sold wrong, it happens.

Remember — investing in start-ups is scary AND it’s a game of trust. You are trusting the founders. They can easily take the money and run (this happens). They can wire the money to a fake company (this happens). They can not work for ramen, 24×7. They can recap the company and wipe out your investment. They can amend the documents without your consent. You may have just met them. There are so many ways your investors have to trust you. In my experience, many founders don’t really think about this, not directly.

If you even accidentally break that trust, it’s gone. And if you even accidentally break it before the money is wired. Then the money ain’t coming.

View original question on quora

Published on September 28, 2016
Share This