HN Explorer

Ask HN: What did you do when your investors invest in competing companies?

22 points by bwang29 ↗ HN
Say you've been working on a startup that's doing very well and your seed round investor just invested into a company with similar technology, is there anything founders should be aware of such as disclosing information to investors?

8 comments

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thiagooffm
Get a loan in the bank and invest some in their business if you believe in the market of the product? :-)
mattmanser
I think the only winner in that scenario is the ad networks taking all your money as you bid against each other
Gustomaximus
If advertising is done right it will have a positive ROI. Advertising should be treated as an investment, not an expense. Very common mindset error not to do this.
mattmanser
I didn't say that. Very common mindset error to put words in someone else's mouth.
bkovacev
The investors always protects their own interest - remember that. They not only bet on the technology, but also on the people behind it. Depending on the agreement, the investor might not "owe" you anything. Thus, if they invested in another product in the same emerging market, they're trying to ensure greater % of success and ROI for themselves.

But, you do "owe" things to an investor - like reports, hard work etc. What you do, however, OWE to yourself is that you protect your idea/product to the fullest.

Thus, you only feed them what they need to know, thus disclose only relevant financial info. If they ask for other info be sure to be brief. Don't disclose the actual details about the tech behind it.

I assume if you know who they invested in, you know the amount and probably the terms, thus assess. More investments > higher risk > higher reward. If those investments were <250k, that's normal and I wouldn't be to worried about it.

amorphid
IANAL.

Correct me if I am wrong, but an investor's main interest to make money. They want you to succeed. If for some reason they are just milking you for information, remember you aren't under any obligation to tell them all your secrets. If the investor isn't a board member, you don't really have to tell them anything at all.

Don't stress too much about your investors. The only thing you can control is focusing on building a killer company. And you may find that your "competitor" sells a similar product to a different customer base, effectively making them not your competitor.

Powerofmene
Provide what is required and do not feel it necessary to share things beyond that especially with regards to new technologies etc that you are developing.

Remember that your investor investing in a company that does something similar to yours is not necessarily a bad thing. Competition can be a very good thing. It fosters innovation and creativity, helps keep things moving forward and brings more attention to emerging technologies, to name a few, etc. That investment may be better for your company than your presently realize.

Remember, one boat is a cruise; two boats make a race.

magacloud
Our investors consult us about the decision to invest in other companies, sometimes, they introduce to competitors to see if we can triple the outcome if we work together.

Like many said, investors want to make money.