Korva is a scroll of the internet’s best ideas.
Investors paid ex-employees $1,000
Refusing investor calls
Peter Rahal, founder of David Protein, did not take investor calls. He thought they were a bad use of time, and he had his own capital. When a friend finally pushed him to talk to Neil Mehta's firm, Green Oaks, he told them the business would grow on profitable sales and a line of credit.
Calls from old colleagues
Time went by, and then about twenty people he had not spoken to in five years messaged him. A firm was offering $1,000 to anyone who would describe their experience of working for him. He told each of them to take the call, assumed it was someone digging for dirt tied to the litigation, and had no idea an investor was behind it.
Why he chose them
When the Apogee deal came together, he went back to Green Oaks and to Valor for money. Learning that Green Oaks had been behind those calls changed his view of them: they had done diligence on his leadership, the most important thing for an investment like this, before any deal existed. He ran no auction, and Green Oaks led the $85 million round.
Why do investors call a founder's old colleagues?
Back-channel references let investors hear about a founder's leadership from people the founder did not choose to put forward. A pitch meeting shows how a founder presents, while former employees show how the founder behaves under pressure. Venture and growth investors commonly treat reference checks as a standard step before committing money.
How does a line of credit fund growth?
A revolving line of credit lets a company borrow up to a set limit and repay as cash comes in. For a food company, that can cover buying ingredients and packaging months before retailers pay. Lenders often secure it against inventory and unpaid invoices, so it scales with sales. The company pays interest only on what it draws.
What does a lead investor decide in a round?
The lead investor usually negotiates the price and terms, writes the largest check, and sets the template other investors accept. Follow-on investors often rely on the lead's diligence rather than repeating all of it. A lead typically takes a board seat as well.
More from David Senra
