Last month I wrote:
There are funds that waste the time of startups never actually writing checks. I won’t call them out publicly by name, but one prominent institutional lender just wasted 10 months of time of one my fledglings, and I’m sure they are sitting around as upset with us as we are of them.
I thought that was the end of the story. 10 months of conversations and due diligence, two approvals by the investment committee, then cancelled at the last moment when we pushed back at their onerous terms. Add up the value of the hours that we and our portfolio company spent working to please this lender and beyond the direct costs are measured in thousands of dollars. That on top of hundreds of thousands in lost opportunity costs.
But no, the story didn’t end there. Today we received an email from this funder asking for us to pay their legal bill.
It was their investment committee who ultimately voted down this loan. They walked away from negotiations. And now they want us to pay them for the privilege of wasting our time.
And they call themselves an impact investor!
Seriously… if you are an investor working with young companies and if you don’t have a process to get from ask to wire within a month, then you are doing it wrong. That is the pace that young companies work at. Not three months. Not six weeks. Ideally less than 30 days.
And if you think that is impossible, the record at Africa Eats is 48 hours. We received an ask on a Monday. Our one question was “when can you pay us back?”, answered on Tuesday The wire was initiated Wednesday morning.
How that org is able to work at that incredibly fast pace is a long story. The point of sharing that anecdote is to demonstrate that it is possible to create an investment company that works at the pace of startups, rather than at the pace of banks/foundations/government. And in a way that doesn’t ask for the investee to pay when deals don’t go through.