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Know your investor

January 24, 2012

Seems like as pretty logical thought, right?

If they are going to give you money, and you’re going to take it, you should know something about each other. After all, if you’re taking money from them you’re practically married… from a financial perspective anyway.

So I never understood the model of a venture investor sprinkling a little money over a wide series of investments.I know it was/is a trendy model, but I don’t get it.

The entrepreneur can’t reasonably expect to benefit from the investors’ close attention and contacts, as the investor is too tapped out giving a little love to their many companies.

And the venture investor doesn’t benefit from getting to know their companies and therefore doing their utmost to helping them succeed.

And especially… the LP doesn’t get a sense there is a lot of diligence or expertise in the investment process. Anyone can sprinkle money blindly and hope for the best, so why pay management fees and prayed-for carried interest?

Anyways, these are the questions that vexed me. I’m glad I’m not alone.

The 3 key limitations of spray and pray seed investors | VentureBeat.

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