There was onceFintech founders could attract 10 investors before closing a round relatively quietly. Entrepreneurs could even ask VCs to sign non-disclosure agreements (NDAs). to Keep your information confidential. Today everyone is a fintech investor and no one signs NDAs.
This changed dynamic puts the founders in a difficult position.
Nabeel Alamgir, CEO and founder of Lunch boxstruggled to collect his first institutional check for his restaurant tech startup. After more than a year of searching, Alamgir found an investor who understood his vision. Better still, the investor had ties to restaurants in New York City that Alamgir wanted to land. So Alamgir reported everything Lunch box, From the financial data to the product integration roadmap to the go-to-market strategy.
After a month of due diligence, the investor Alamgir has ghosted. Four months later, the same investor’s portfolio company launched a product that mimicked Lunchbox.
“I didn’t do any due diligence on them like they did for me,” he said. “And I’ve forgotten all of my rules. Most of the rules go out of the window as money runs out. “
Alamgir’s experience is a classic case of back-channeling, a sometimes unfortunate but unusual occurrence for founders in Silicon Valley. It’s no secret that investors share information as a competitive advantage. However, as venture capital grows as an asset class and more investors penetrate the industry, the way information is disseminated becomes even more difficult and comprehensive.
Alamgir advises early stage founders who want to collect their first check to “contain the excitement.”
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