Post Written by Vasily Alekseenko

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When it comes to raising money, most founders are so desperate for a “yes” that they ignore all the red flags that come with it.

Chris Howard (serial founder, investor, psychologist, and someone who’s raised millions) put it simply:

❝“Most bad investments happen because founders let them happen.”

Let that sink in.

Chris isn’t blaming founders – he’s calling out the power dynamic that puts investors on a pedestal and turns founders into subservient, validation-hungry people who say yes to terms they know are shit.

This mindset? It’s dangerous.

The Two Golden Rules 💥

Chris says there are only two things that matter when choosing an investor:

1. Power Dynamic Check

Ask yourself: Does this investor understand they are riding on YOUR success?

If they act like they’re doing you a favour, run. The best investors say,

❝“I found a great opportunity and it’s a privilege to be part of the journey.”

If they think they’re the main character, that’s already a red flag.

2. Do. F*cking. References.

Speak to other founders they’ve invested in.

Not just the golden child from last month — find people they backed over a year ago.

What happened after the honeymoon? How did they act when things weren’t perfect?

The Red Flags 🚩 (in Chris’s words, and mostly unfiltered)

🔻 Term Sheet vs Shareholder Agreement Mismatch

If the legal docs include things you didn’t agree to — that’s a sign of intent.

They’re playing games. They’ll keep playing them.

🔻 Reserved Matters That Let Them Fire You

If investors can replace you as CEO without your consent, that’s not venture capital, that’s corporate takeover energy.

🔻 Tranches

“I’ll invest £3M… in 3 parts.”

Translation: We’re going to hang that money over your head and pull it the second you miss a metric.

Early-stage startups pivot constantly. Tranche-based deals are traps.

If they insist, make them put the full amount in escrow. If they say no? Walk.

🔻 They’re Not the One Signing the Cheque

If they don’t have decision-making power, it’s not a real commitment.

Yellow-orange flag. Be cautious.

🔻 Wanting Extra Equity for “Advising” You

Fine… if it’s separate, vesting, and you evaluate them like a team member.

If they want sweat equity and won’t vest it, tell them to f*ck off. Chris’s words. Not mine. (Okay, also mine.)

🔻 Board Seat Power Grabs

Never give up board control early. Avoid even-number boards.

If needed, appoint an independent — but you choose them.

🔻 Pro-Rata Rights That Can Be Sold Without Your Consent

This one’s sneaky. If they can sell their right to invest in the next round to anyone they want, you lose control over who gets on your cap table. Always ask for founder approval.

🔻 Clauses That Let Them Change the Team or Strategy Post-Investment

If they want the right to override your direction, they’re not betting on you. They’re betting on control.

The Bottom Line 💬

Red flags are not hard to spot.

But when you’re tired, stressed, low on cash, and high on hope… you ignore them.

You convince yourself this deal is the deal. You need it. You’ll make it work.

But the truth is, bad investors don’t just slow you down — they kill companies.