Houston Voices

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

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.

Through increasing awareness, affordability, and accessibility, the city of Houston hopes to grow the number of electric vehicles on Houston roads by 2030. Courtesy of EVolve Houston

The city of Houston has taken a major step toward reducing carbon emissions caused by its estimated 1.3 million vehicles that drive the city's streets daily.

Mayor Sylvester Turner announced a new partnership between the government, local businesses, and academic leaders that has created EVolve Houston. The coalition is aimed at boosting electric vehicle sales to 30 percent of new car sales in Houston by 2030.

"This new partnership will help solidify Houston's success as a leader in transportation technology and it will help improve air quality for the citizens of Houston and beyond, by reducing reliance on vehicles powered by carbon-based fuels," Mayor Turner says in a release. "Houston will now have a dedicated resource working to increase the adoption of electric vehicles, wherever it makes sense to do so. Nearly half of the greenhouse gas emissions in Houston come from transportation. Shifting to zero emission forms of transportation is a key strategy to help us meet our ambitious climate goals and improve our regional air quality."

EVolve Houston, which will contribute to the city's Climate Action Plan that was announced in July, will focus on increasing awareness, affordability, and availability of electric vehicles. The coalition's founding partners include the city, CenterPoint Energy, the University of Houston, NRG Energy, Shell, and LDR.

"Houston has bold goals to improve air quality and reduce greenhouse gas emissions. To do that, we must make a major impact on one of the largest sources of emissions, which is transportation" says Dr. Ramanan Krishnamoorti, the chief energy officer at University of Houston.

The partners will focus on launching pilot projects as well as hosting demonstrations and awareness activities to promote EV adoption, according to the release.

"At CenterPoint Energy, we are committed to making a positive difference in the communities we touch, and environmental stewardship is an integral component of our overall corporate responsibility approach," says Scott Prochazka, president and CEO of CenterPoint Energy, in the release. "I am proud to partner with Mayor Turner and other founding members of EVolve Houston to help accelerate clean transportation for Houston."