Jeffery Potvin – You Must Do Your Due Diligence on Investors Too

May 30, 2021

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BIO: Jeffery Potvin is an angel investor in multiple regions and has invested in 55+ companies. He is a member of seven angel groups and screening committees while being the driving force behind Open People Network (OPN)! OPN is a group of angel investors helping accelerate the growth of early-stage startups.

STORY: Jeffery’s company had been working on and off with this startup for about two years. When the startup came back with a product and an investor, Jefferey took interest, and even though he had some doubts, he trusted the startup. It turned out his gut was right because the investor never held his part of the deal.

LEARNING: Walk away from anyone trying to pressure you to close a deal and have the proper documentation in place before you sign the contract. The ultimate validation comes from your customer.

“Look for resources, educate yourself, learn and dive right into it. Build that product, then find that angel investor.”

Jeffery Potvin

Guest profile

Jeffery Potvin is an angel investor in multiple regions and has Invested in 55+ companies. He is a member of seven angel groups and screening committees while being the driving force behind Open People Network (OPN)! OPN is a group of angel investors helping accelerate the growth of early-stage startups through The Supporters Fund and Pitchit Series. Jeffery is a lifelong entrepreneur with a proven track record of building companies and reinventing existing businesses. He has worked with a list of great clients, from startups to enterprises, over the years. Jeffery is a mentor, coach and loves to climb mountains.

Worst investment ever

Jeffery worked with a company for about two years on and off, helping them through their journey. An opportunity came up to invest in this new emerging company that had some great IP. The company had found an investor that would help them with the production. The investor was going to contribute considerable funds too.

Getting deeper into the business idea

Jeffery went through this process of doing a deep dive and analysis around the business. He requested that he meet with the investor who would pick the ball up and put a lot of money in to make this company successful.

Jeffery met the investor, and as he started to pick their brain and learn more about them, he asked them questions because he had doubts. However, he never admitted his misgivings; he just kept going forward.

Ignoring his

Jeffery’s gut still told him that something was not right. But because he had been working with the startup for such a significant amount of time, he trusted that they had picked the right investor.

Jeffery did not want to slow down the progress, so he ignored his gut, did all of the analysis, came back, and signed off on the deal.

The truth comes out

Jeffery signed everything off, and everything was good. About six months into the project, when the final handoff was supposed to happen, the unforeseen happened. Once everything was solidified and sorted out, the investor ended up having creditors coming after them, and they went bankrupt. Everything they had worked hard for went down the drain just because of one person. If only Jeffery had listened to his gut.

Lessons learned

Walk away from anyone trying to pressure you to close a deal

If there is any panic or pressure to close a deal, walk away. There’s a reason they’re putting that pressure on you. They’re probably in debt or something else. There’s always a problem when it’s high pressure. Nothing needs to be solved in five minutes; you should always have time to think.

Be wary of third party validation

Validating a product is very important but be careful when the owners want to bring in different people to validate your problem. If they cannot validate it themselves, then that is a red flag.

Have proper paperwork before you make the investment

Most early startups don’t pay attention to the paperwork and analysis side. But if you want to avoid trouble in the future, you must buckle down and put that paperwork together before you invest.

Andrew’s takeaways

Dig deep with your questions

Anyone who is trying to trick you into an investment will always come well prepared. They will come ready for your questions. So you have to go beyond the answers that you get.

The ultimate validation comes from your customer

The ultimate validation comes from the customer. So if you’re not ready to go out to the market, find a customer that you could partner with and test your market with them. Find out if the customer would be interested in your product. That type of customer validation is the best validation.

Actionable advice

Overanalyze everything; scrutinize the hell out of every opportunity that comes your way to make sure that you get the result that you’re looking for when you say yes.

No. 1 goal for the next 12 months

Jeffery’s number one goal for the next 12 months is to complete a $10 million raise and invest in another 30 companies. He’s targetting to go to his next $50 million raise.

Parting words

“Jump out there, start talking to and helping early-stage companies work their way through the angel investing cycle.”