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Why am I so lucky?
Mark Suster, one of my favourite VC bloggers, wrote a post entitled “Why am I so lucky?” In it, he says that if some unexpected luck comes your way, be sceptical. Not distrusting, just sceptical.
So if a large Silicon Valley investor contacts him, offering him the chance to invest in the A round of a company that VC has backed for a seed round, he asks himself “Why am I so lucky?” The Silicon Valley firm can afford to fund the A round (and the B round, and the C round). They were in early. They don’t usually co-invest with Mark. So why is so lucky this time?
The full post is worth a read: Why Am I So Lucky? Why You Need to Be Sure You’re Not the Sucker
But it is also a great reminder of why you should be so cautious about who your first investor is. If it’s a great VC firm who backs you at the seed stage, you might now be in trouble: if they don’t follow on their investment, the danger is that no-one else will either. Ditto with strategic investors, where I urge you to be very cautious about taking money from a strategic investor.
It’s not just about the first round. It’s about thinking how to make sure you are keeping options open, not closing them down, when you take investment.