How to be careful when looking for investors.

Hostile Bargaining Tactics: Uses intimidation or extreme demands to pressure founders into unfair terms.
Opaque Dealings: Avoids sharing critical financial or operational details, fostering distrust.
Inflated Valuations: Pushes unrealistic company valuations to manipulate equity stakes.
Harsh Exit Terms: Prioritizes investor payouts over founder/team returns in liquidation scenarios.
Stringent Liquidation Preferences: Demands disproportionate payouts in exit scenarios.
Restrictive Covenants: Imposes rules limiting strategic flexibility (e.g., hiring, spending).
Excessive Dilution: Aggressively erodes founder/team ownership through unfair equity terms.
Unreasonable Valuation: Forces valuations that undervalue the company or founder equity.
Predatory Loan Terms: Introduces debt with exorbitant interest rates (e.g., 30%+ APR).
Bait-and-Switch Funding: Promises follow-on investments that never materialize.
Hidden Fees: Slips undisclosed costs or penalties into contracts.
Exclusivity Clauses: Blocks future funding by restricting access to other investors.
Personal Liability Demands: Forces founders to guarantee losses with personal assets.
Post-Investment Term Changes: Renegotiates unfavorable terms after capital is deployed.

Dominating Authority: Seizes excessive control over company decisions.
Operational Meddling: Oversteps into daily management beyond agreed roles.
Micromanagement: Obsesses over trivial details, stifling autonomy.
Unrealistic Expectations: Sets unattainable milestones regardless of market realities.
Quick Exit Obsession: Prioritizes fast sales over sustainable growth.
Reckless Risk-Taking: Pushes high-debt strategies or speculative bets.
Short-Term Greed: Sacrifices long-term health for immediate profits.
Ignoring Market Realities: Pressures growth strategies that ignore competition or saturation.
Scope Creep: Interferes in areas outside their expertise (e.g., product, HR).
Vendor/Partner Nepotism: Forces deals with affiliates, even if inferior.
Forced Vendor Partnerships: Insists on using their network at inflated costs.
Operational Handcuffs: Restricts hiring, spending, or pivoting via contractual terms.

Unprofessional Conduct: Communicates rudely or belittles ideas.
Vision Dismissiveness: Undermines the founder’s long-term goals.
Gaslighting Founders: Dismisses concerns as “emotional” to retain control.
Erratic Communication: Ghosts for weeks or communicates inconsistently.
Non-Constructive Feedback: Offers demoralizing criticism, not solutions.
Time Drains: Imposes unnecessary meetings/reports that distract operations.
Cultural Tokenism: Pays lip service to diversity without actionable support.
Overpromising Non-Financial Value: Claims expertise/connections they can’t deliver.
Boundary Crossing: Requests personal favors (e.g., perks, special treatment).
Cultural Clashes: Conflicts with company values, disrupting teamwork.
Undermining Founder Authority: Proposes replacing founders with outsiders.
Negative Reputation: Known for unethical behavior or failed investments.

Ethical Misalignment: Advocates practices clashing with company values.
Encouraging Non-Compliance: Suggests shortcuts to bypass laws or regulations.
Manipulating Metrics: Pressures founders to inflate KPIs or financials.
Exploiting Information Asymmetry: Uses undisclosed data to manipulate negotiations.
Self-Serving Decisions: Prioritizes personal gains over company survival.
Unethical Pressure: Coerces founders into morally questionable actions.
Litigation Habit: Frequently sues over minor disputes.

Competitor Ties: Holds stakes in rival firms, creating loyalty conflicts.
Nepotistic Hiring: Demands unqualified associates in key roles.
Information Hoarding: Withholds market insights critical to strategy.
Equity Grabs: Demands large ownership without adding value.
Exit Blockades: Vetoes lucrative exits to serve their own agenda.
Abandonment History: Exits investments abruptly during crises.
Opaque Syndication: Brings in undisclosed co-investors with conflicting agendas.
No Skin in the Game: Invests minimal capital, avoiding personal risk.
Flight Risk: Threatens to withdraw support at the first sign of trouble.
Ownership Obsession: Focuses on equity control over contributing to growth.
Empty Promises: Fails to deliver pledged mentorship or resources.
Self-Interest Focus: Prioritizes personal financial gains at all costs.
Misaligned Exit Timelines: Pushes premature exits that undervalue the company.

Veto Power Over Decisions: Blocks major moves (e.g., partnerships, pivots).
Unusual Deal Structures: Proposes convoluted terms that obscure risks.
Excessive Control: Demands unreasonable governance rights (e.g., board dominance).
Lack of Transparency: Conceals conflicts of interest or hidden agendas.
No Industry Understanding: Lacks basic market knowledge, leading to poor advice.
Inexperienced Backer: No startup expertise, resulting in misguided guidance.
Reluctant Non-Financial Support: Withholds mentorship, networks, or expertise.

Key Takeaways:

Toxic investors prioritize control, quick returns, or self-interest over the company’s health.
Red flags span financial exploitation (predatory terms), operational interference (micromanagement), ethical breaches (non-compliance pressure), and relational toxicity (gaslighting).
Always vet investors for alignment with your vision, transparency, and a track record of integrity. Conduct due diligence via references, legal review, and portfolio company feedback.

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