"Value-subtract" investors

You’ve heard of 10X engineers. You’ve heard of value-add investors. Now let’s talk about value-subtract investors…

It’s a label that Kara LaForgia, Esq. and I came up with during a two-hour car ride to the airport while stuck in traffic.

Kara and I are both early-stage, consumer-focused investors who obsess over providing value to the companies we back.

We make customer intros. We help find new hires. We provide strategic advice. We even coach founders through the fundraising process.

Very few investors go to these lengths to support their portfolio founders. After writing the check, many investors are net-neutral, at best.

But, there is also the dreaded value-subtract investor.

This is the investor who writes the smallest check and demands the most in return. This is the investor who constantly asks favors of their portfolio founders. This is the investor who tries to use their position to influence the company’s strategy. This is the investor who is willing to force an early sale in order to get their liquidation preference and target return at the expense of all other shareholders.

On that ride to the airport a few weeks ago, Kara revealed that these “value-subtract” investors have influenced her approach to raising capital for her own fund.

She brought up some great points — For GPs, choosing your LPs is just as important as choosing your investments.

Those value-subtract LPs will damage your ability to execute and, even worse, impact the founders you invest in.

I think Kara has a great set of requirements when assessing potential LPs: People who have invested in funds before and people who have worked with GPs (or investors) in some capacity before.

It’s never been easier to stand out amongst your peers: Hustle your ass off and be value add!

- - - - -

P.S. If you’re an LP looking to invest in one of the most talented, early-stage investors in consumer right now, check out Kara’s Hyve Ventures! 💄