Red Flag List for VC Deals
I was watching an episode of a Chinese-version Shark Tank show on my flight back to the States from China. I found many red flags in the startup ideas pitched in the episode, and I decided to write down a list of red flags that I noticed in my VC career.
There are two posts (here and here) that have already covered many red flags identified by the top VCs. Therefore, I am not going to cover many of those “entry-level” red flags such as “founder being slow in replying emails”, “founder not grounded in reality”, and “founders are dating”.
Instead, I will cover the red flags that might be easily ignored. Please be aware that this list only covers part of the potential red flags.
Founding Team
- Being emotional or irrational under pressure. This is especially a big red flag for those execution-heavy startups that will heavily rely on the founding team’s leadership skills. We could always expect a lot of challenges coming up during the start-up process. If the founders cannot control their emotions well, they might not be able to lead the team to overcome the challenges in execution.
- Lack of empathy. To me, everything can be changed along with the growth of a company, while there’s only one thing that will not change: the team. If the team does not know how to refine the technology, improve the product…