5 investor red flags to look out for, according to this University of Houston expert

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Keep an eye out for these warning signs when looking for funding. Miguel Tovar/University of Houston

Venture capitalists give you plenty of reason to be on the look out for investor red flags.

In The Parable of the Scorpion and the Frog, the frog entrusts the scorpion not to sting it while it helps the scorpion cross a lake. The scorpion promises not to sting the frog, reasoning that both would drown. The scorpion stung the frog anyway. As a result, both drowned. The moral of the story is that a scorpion, like any animal, is true to its nature.

Think of venture capitalists as scorpions. They are constantly trying to undermine established terms in order to either avoid a financial downside, or collect on the financial upside, even at a startup's expense. As a result, they will not think twice about screwing you over.

Venture capitalists have a clear institutional objective: if your company is successful, they collect as much money as they can based on the agreed upon terms. On the other hand, if your company falls flat on its rear, venture capitalists will look to avoid losing money. At all costs. Even if it means bending the terms of your agreement and hurting your company further.

Here are the top five red flags to look out for from a venture capitalist.

Bad terms

Firstly, there are many times when a bad investor will strong-arm a company founder into a tough deal. If the investor even hints that there will be no room for negotiation, that's a definite red flag. You have a right to negotiate certain terms and request flexibility. The best investors will want to work with you because it's unlikely they'll want a sour relationship with their investment. If your investor seems to say "no" a lot to you, how much do they really care about your company's growth?

Unpredictable behavior

Any investor that exhibits unexpected behavior is sure to give you tons of headaches down the road. Imagine after agreeing to terms, your new investor decides he or she do not want to be on your company's board all of the sudden. Either because they don't have the time or just don't want the responsibility. Instead, they would hire an executive from another company to represent their interest on your company's board. Why didn't they tell you this beforehand? Now you'll have to adjust to this sudden change of heart. Consequently, your company will have to adjust, too.

Strict monogamy

Okay, so your relationship with your investor is not a romantic one. That's exactly why it should be okay to work with other investors. If your venture capitalist tries to discourage you from doing that, it shows a glaring insecurity. Multiple investors means more money for your company. Any investor that tries to keep you from working with other investors probably does not have your startup's best interest in mind.

Rotating door of CEOs

If an investor has a history of firing founders or CEOs too fast, it could show that they do not have the patience required to allow a startup to grow. Moreover, bad investors will overreact to a missed milestone (like under-performing for a quarter) and fire a CEO. So, seek an investor that has a reputation of working with founders, even through those bumps in the road.

Dominating discussions

Lastly, any potential investor that completely dominates a discussion does not leave room for other ideas and different perspectives to be brought to the table. Your company meetings should brainstorming sessions and strategic conversations where everyone has input.

Therefore, any one-sided discussion about company operations is sure to leave a bad taste in everyone else's mouths. In short, if your discussions with a potential investor are one-way streets where they are talking way more than they are listening, what do you think board meetings will be like with them at the helm?

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This article originally appeared on the University of Houston's The Big Idea.

Rene Cantu is the writer and editor at UH Division of Research.

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7+ can't-miss Houston business and innovation events in May

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Editor’s note: Houston is living up to its nicknames as Space City and the Energy Capital of the World this month with a lineup of insightful talks, pitch days and industry conferences. Plus, there are opportunities to network over crawfish, learn about brain health and more. Here’s what not to miss and how to register. Please note: this article may be updated to add more events.

May 7 – Ion Block Party and Crawfish Boil

Head to this special edition Block Party, featuring a crawfish cook-off competition among the Ion’s businesses. Competing teams include Transwestern, Microsoft, Rice Alliance, Rice Nexus, South Main Baptist, Per Scholas, Industrious and many others. Taste test crawfish while supplies last, and sip a complimentary drink from Second Draught.

This event is Thursday, May 7, from 4-7 p.m. at the Ion. Register here.

May 12 – Why the Next Decade of Breakthrough Brain Tech Matters For You, and What to Do About It

Hear from Matias Serebrinsky, co-founder and general partner of San Francisco-based PsyMed Ventures, at this talk presented by EO Houston. Serebrinsky will discuss why founders are disproportionately affected by brain health issues and look at breakthrough brain and mental health tech.

This event is Tuesday, May 12, from 11:20 a.m.-1 p.m. at Tony's on Richmond Avenue. Register here.

May 18-19 — Geothermal Transition Summit North America

This two-day summit serves as the meeting point for the geothermal and oil and gas industries and will focus on geothermal energy, including scaling plants and navigating state regulations. The event promises 40 expert speakers, 15 exhibition spaces, and networking opportunities with 250 industry decision makers.

This event begins May 18 at Norris Conference Center. Register here.

May 19 – IOT Innovation Day

IoT Innovation Day will present a series of fast‑paced, 15‑minute tech talks focused on the future of connected devices. These sessions feature insights from founders, engineers, product innovators and industry leaders. Attendees are also invited to sign up to present their own tech talk showcasing their expertise, startup or solution.

This event is Tuesday, May 19, from 10 a.m.-6 p.m. Register here.

May 20-21 — ESF North America

ESF North America returns for its 5th edition, under the theme of “innovation and adaptation.” Attendees will explore how technology, innovation, and collaboration can drive a resilient, competitive refining and chemicals industry.

This event begins May 20 at The Westin Oaks Houston at the Galleria. Register here.

May 21 – AI + Energy Sector Pitch Day

Hear from startups powering the AI boom or using AI to support the energy transition at Greentown's latest installment of its Sector Pitch Day series. Brian Walker, program manager for emerging technologies in the U.S. Department of Energy’s Building Technologies Office, will present the keynote address. Six Greentown startups will present pitches, as well as others from IMPEL, a DOE tech-to-market program, and more. Stick around for a networking happy hour.

This event is Thursday, May 21, from 1:30-6:30 p.m. at the Ion. Register here.

May 28 – NASA Stories at the Ion: A Conversation with NASA’s Artemis II Orion Vehicle Manager Branelle Rodriguez

NASA’s Artemis II Orion Vehicle Manager Branelle Rodriguez will discuss what it took to ready the spacecraft for its mission and return to Earth at this special installment of NASA Stories. Rodriguez will share insights on Orion’s high-speed reentry, the views of the Moon and Earth witnessed by the crew, and what’s next for Orion on NASA’s upcoming Artemis missions in 2027 and 2028. Complimentary breakfast and networking take place before each talk.

This event Thursday, May 28, from 8:30-10 a.m. at the Ion. Register here.

May 28 – NASA Tech Talks: Texas-France Space Hub Business Accelerator Initiative

NASA Tech Talks is partnering with the Rice Space Institute (RSI) this month to host the second cohort of the Texas-France Space Hub in Houston. The hub aims to unite academic institutions and private enterprises to expand commercial space presence in both countries. Startups from the hub will present during the event, followed by drinks and networking at Second Draught.

This event Thursday, May 28, from 6-7 p.m. at the Ion. Register here.

New TMC partnership aims to grow Houston’s biomanufacturing workforce

workforce partnership

Houston is a frontrunner in the race to introduce and manufacture advanced therapeutics to the medical world. A new agreement between the Texas Medical Center (TMC) and San Jacinto College (SJC) aims to speed more experts and their technologies towards the finish line.

Earlier this month, the world's largest medical center and the nation’s second-ranked community college announced their new partnership that will set students on a path towards careers not only in life sciences in general, but also in pharmaceutical and biomanufacturing specifically.

SJC already has programs in those majors—its first graduates are now joining the workforce—but working with TMC will help the college recruit new students, as well as aid in enrollment and participation. Thanks to this collaboration, SJC students will benefit from more experiential learning and be able to transition more smoothly into the next steps in their training.

“Houston is a premier global hub for life sciences and biotechnology, and the talent we need to advance therapeutic drugs, diagnostics, and cell and gene therapy is already here,” William McKeon, the TMC’s president and CEO, said in a news release. “With more companies choosing to establish their headquarters in Houston and the daily breakthroughs happening across the TMC campus, partnering with San Jacinto College is an important step toward sustaining that momentum and unlocking even greater innovation and growth through the promising talent that already exists within our state.”

The partnership is currently slated to last two years, but the institutions have the option to extend after that.

For students, their journey to becoming scientists will likely start with Biopath @ TMC, a program that introduces high school students to biomanufacturing careers and what it takes to pursue one. Since its inception two years ago, the program has worked with more than 2,000 students around Harris County.

“This partnership exemplifies San Jacinto College’s ability to design and deliver programs that align with current workforce demands while opening doors for untapped talent across the Houston region,” Brenda Hellyer, SJC chancellor, said in the release. “TMC is a key industry leader in our region, and San Jacinto College has a unique global curriculum that provides the foundation and skills required for students to succeed and graduates to thrive in meaningful careers that will contribute to the innovation and advancement of the life sciences.”

Thanks to this new collaboration, more of Houston’s biomanufacturing workforce will soon be locally grown.

Houston legacy planning platform secures $2.5M investment, adds to board

fresh funding

Houston-based Paige, a comprehensive life planning and succession software company, has secured a $2.5 million investment to expand the AI-driven tools on its platform.

The funding comes from Alabama-based 22nd State Banking Company, according to a news release. Paige says it will use the funding to expand automation, AI-driven onboarding and self-service tools, as well as add to its sales and customer success teams.

The company was originally founded by CEO Emily Cisek in 2020 as The Postage and rebranded to Paige last year. It helps users navigate and organize end-of-life planning with features like document storage and organization, password management, and funeral and last wishes planning.

“Too many families are left trying to piece together important information during some of the hardest moments of their lives,” Cisek said in the news release. “This investment allows us to accelerate the next phase of growth for Paige by improving the product and expanding support for our members, our financial institution partners and the communities they serve,”

In addition to the funding news, the company also announced that 22nd State Banking CEO and President Steve Smith will join Paige's board of directors.

“We believe banking should be grounded in relationships and built around the real needs of the people and communities we serve. Paige brings something deeply relevant to that mission," Smith added in the release. "It helps families prepare for the future in a practical and meaningful way, and it gives the banking community new pathways to support customers through important life transitions.”

Paige estimates that $124 trillion in assets will change hands through 2048. Yet about 56 percent of Americans do not have an estate plan.

Read more on the topic from Cisek in a recent op-ed here; or listen to InnovationMap's 2021 interview with her here.

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