TL;DR - Founders should be mindful of the different goals and incentives driving each type of investor they might encounter.
Helpfulness - 5
Tags - investor mindset, incentives, vc structure, range of investors
- What are the different types of investors that founders are likely to encounter?
- What motivates each of these investor groups?
- How are investor-founder relationships structured in each case?
- Classic VCs invest LP money to earn management fees and, more important, a percentage of investment profits.
- Incentivized to get a big return on investment / multiple.
- Angels invest their own money directly, and fall on a spectrum from knowledgeable ex-founders to inexperienced wealthy people.
- Often simply motivated by a desire to invest in a startup, regardless of outcome.
- Also covers accelerators, syndicates, crowdfunders, family/friends, family offices, corporate investors (direct and through venture arms), governments, endowments, seed funds, hedge funds, mutual funds, and sovereign wealth funds.
Follow up links:
- More on investor incentives, http://paulgraham.com/swan.html