My Investor Horror Story - Startups Anonymous

I am a single founder who started a media company a few years ago. From my previous work I brought in the technical experience and contacts and started the company by myself. Even though I was still a one man show, the business was profitable and growing, but I was hindered by administrative tasks which would have required me to hire another person which I considered too risky at the time.

By chance I met an investor who was interested in my business and who was also planning to make investments in companies that we could market through my business. Together we thought we could combine my expertise and benefit from his other investments. Another benefit was cash security and that I could finally focus on the growth of the company instead of administrative task.

At the beginning everything went good – I started hiring team members, the website was built within 2 months and first revenue came in after 3 months. We even reached break even after only 6 months. However, this was the point when problems started to begin.

We had technical issues behind the scenes that would have required some effort on coding but would not directly impact results in the short run. The investor kept pushing but revenue jumped up and then fell down again because of this. The other startups that the investor had invested in turned out to have no money to spend on marketing.

Adding to all this, the investor hired more people and forced me to hire one of his overpriced consultants and since we did not produce enough revenue he also put one of his managers on the board to control and check on me.

With all these extra costs we became unprofitable again. He didn’t trust me and the team that we had the organizational skills to get this startup running, so he implemented more and more control mechanisms.

We ended up spending 40% of our time on reporting (daily reports of every employee to him). If the intern forgot to send this he would call me at 10pm in the night, asking why intern x did not send the report. Overtime was expected and at 7pm he would come in and ask employees how much money they have made him today. He even asked me once if I had the money for his new mansion yet!! Obviously this was a rhetorical question, but he loved to show his power.

He also introduced a forced seating order where team members would have to sit in one row, everyone facing forward so that his consultant and I could monitor everyone at work from behind. It was not a pleasant atmosphere and all of this did not benefit the growth of revenue.

As I could not take this behavior anymore and I saw no road to success, I decided to leave the company but not before having a legal battle and being threatened by the investor over my shares. After 3 months and with the help of my lawyer, I finally managed to get a halfway decent agreement.

After I left the company they hired another managing director but this person left within 3 months as he could not work with the investor. Henceforth the consultant took over, but things got worse. One year after I left, the company was sold to another company. The CEO of the purchasing company contacted me later and told me he got cheated by the investor.

Please beware of business devils that treat people like their personal slaves. An investor does not necessarily know everything and often might ruin your business with their greed.

Good luck.

P.S. 2 years later, I started another company without an investor. We are now growing organically (10 people now) and are already profitable without investment. It was a tough to start but always better than having a nightmare investor again.