Fundraising · Competition

Is it risky to pitch an investor who's already invested in a more established potential competitor?

Adam Friedman President, Civera Software

February 7th, 2015

My venture is at a very early stage. We have paying customers but very little capacity to sell a lot and deploy in parallel for multiple customers. I'm looking for investors in order to scale, and I found an investment group that might be the perfect cultural fit for my venture. However, this group has already invested in (and shares some top officials with) another startup that is in a similar space with a similar vision, has a much larger team, and is growing rapidly. I am wary about revealing my already-profitable business plan with an investment group that is already adept at building a tech team that could replicate my work and scale it more rapidly. Am I being paranoid? If yes, and I should still approach them, how should I go about this?

Jonathan Levitt Chief Marketing Officer at Reitmans Canada Ltd.

February 7th, 2015

I'd say if you don't have anything proprietary then find another investor. There's plenty of money in the market. Not worth the risk in my opinion. 

Brett Fox Respected, Results-Oriented CEO, Entrepreneur, Author, and Coach

February 7th, 2015

Adam,

Here's the deal.  The investor is not going to invest in your company because they have already placed their bet.  

Most likely, your pitch deck will end up with your competitor.  It shouldn't happen this way, but it regularly does from my experience.

My advice: Pass on the opportunity.

Oliver Roup Founder / CEO at VigLink

February 8th, 2015

The advice not to take the meeting is right. But you should understand that much of what you seek to protect can be obtained in other ways - posing as a customer, chatting up your salespeople, other investors who pass your deck along, etc. The only defense against this is velocity. Move fast enough that by the time they take you seriously, you can't easily be extinguished. 

Jennifer Fortney 20+ years’ experience in PR & marketing comms; Founder of Cascade PR, Chicago firm for small business & startups.

February 7th, 2015

I agree with the others. They won't invest in your company anyway - conflict of interest.


Anonymous

February 7th, 2015

Be clear. You are NOT paranoid. It is unethical for the investor to take the meeting.   Brett's spot on. Run from this opportunity.

Vadim Oss Co-founder at Rentini

February 7th, 2015

Adam, due to conflict of interests they shouldn't and won't invest in your venture. There are plenty of others around. You never know who is your "cultural fit" until you get someone onboard who is really into your idea. Just pass on this one

John Lonergan Author: Antidote at Amazon

February 7th, 2015

Don't do it.

They have three reasons for talking to you, all bad for you:
1) They'll refuse to sign an NDA--and will therefore be free to share data with others.
2) They'll poach your people.
3) They won't invest.

averasko

February 8th, 2015

If your goals is to get funded -- pass. Very few investors would invest in two competitive startups. You can check with their past investments though.

Also, be extremely aware of this particular competitor as he is likely to pull a lot of benefits (including funding) from your path going forward. You'd better have a strategy.