top 6 mistakes founders make when dealing with VCs (all based on real cases) 1. conflicts of interest even if VCs tell you it doesn't matter and they'll support all their portfolio companies equally, conflicts of interest can get complicated very quickly just look at the public dispute involving Factory AI's @matanSF and @vkhosla investors often have access to your roadmap, customer data, financials, and internal discussions. when the same investor backs your closest competitor, it's reasonable to question how that information is handled before accepting an investment, find out which other companies the fund has backed in your space and whether they plan to invest in direct competitors if there's an overlap, make sure the information-sharing boundaries are clear and reflected in your agreements, especially if the investor wants a board or observer seat 2. investor rights you don't fully understand I've seen founders spend weeks negotiating valuations while paying surprisingly little attention to the investor rights agreement the dispute involving @isaiah_p_taylor and @mashadrokova is a good example of how complicated pro-rata rights and waivers can become the parties disagree about what happened, but it raises an important issue: some rights can be temporarily waived and later restored, while others can be amended with approval from a majority of investors, depending on the agreement that means an investor's rights can sometimes change without their individual consent it's worth going through these scenarios with your lawyer before closing. understand which rights can be amended, who has the authority to do it, and how those changes could affect future rounds 3. giving third parties access to your cap table your cap table contains some of the most sensitive information about your company, including ownership, investment history, and shareholder details @karrisaarinen discovered that @cartainc's secondaries team had contacted Linear shareholders about buying their shares without the company's authorization Carta said an employee had violated internal procedures and subsequently exited the secondaries business @ItzSuds later raised a related concern about how much control companies actually have over their data on Carta both are worth keeping in mind when choosing any platform that handles sensitive company information I'd pay particular attention to how the company uses shareholder data, which teams have access to it, whether that information can be used for other commercial purposes, and how easily you can export it if you decide to leave 4. losing control of your own company owning the largest individual stake in a company doesn't necessarily mean you control it Benchmark was an early investor in Uber, and @bgurley sat on its board for years. after he stepped off, Benchmark's relationship with @travisk escalated into a legal dispute over board seats and governance whatever your opinion of that conflict, it's a good example of how much influence investors can have through board structures the important thing to understand is who can appoint and remove directors, what decisions require board approval, and which decisions can be made without the founder's support also consider how that structure might change after another two or three funding rounds a board arrangement that seems perfectly reasonable at seed can become a serious problem later 5. liquidation preferences and who actually gets paid in an exit @naval co-founded Epinions, which raised $45M from VCs. when DealTime acquired the company, more than 6 million common shares were valued at zero, while preferred investors received equity in the combined company Shopping com, the combined company, went public in 2004 and was worth around $750M by the end of its first day of trading. Naval and other former founders sued, alleging they'd been misled about Epinions' real value the lesson is pretty simple: your ownership percentage means very little if you don't understand who gets paid first and how your shares are valued in an exit before raising, model what happens if your company sells below its last valuation, especially after multiple funding rounds with different liquidation preferences sometimes a lower valuation with cleaner terms is a much better deal 6. terms that give investors all the upside and leave founders with the risk @JosephJacks_ recently shared allegations about a fund offering terms that included a 5x return requirement, full anti-dilution protection plus additional equity, and the right to remove founders if the 5x wasn't achieved within three years I haven't independently verified those terms, but the combination illustrates something founders should be very careful about investors already receive certain protections through preferred shares and investment agreements when those protections become excessive, you can end up in a situation where the investor has significantly reduced their downside while retaining most of the upside and if the agreement also gives them the ability to remove you from the company, the consequences can extend far beyond dilution worth understanding how these provisions work together, rather than evaluating each one separately one more thing I'd strongly recommend is doing reference calls with founders whose companies didn't work out it's relatively easy to find founders who speak highly of their investors when everything is going well the more interesting questions are about what happens when a company misses targets, struggles to raise its next round, or has to shut down how did the investor behave? did they continue supporting the founder? how did they handle difficult decisions? those conversations can tell you much more about the people you're about to spend the next 5-10 years working with

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