Few founders or investors like to talk about their negative funding experiences. Washing dirty linen in public only smears reputation, we journalists are often told. But this also means that valuable lessons often get buried, or are confined to private conversations. Don’t get me wrong. Investor-founder disagreements are part of the game. Still, it’s rare that early-stage startups end up struggling or close down their businesses because of their seed or pre-seed investors’ unusual business practices. Chicago-based Guild Capital falls in that category of investors. This 13-year-old fund is an early investor in India having put in about $10 million across a dozen companies over the last two years. It has made over 35 investments globally, investing an average of $1 million, and has an overall fund size of over $550 million. The startups it has invested in are not well-known. Though one may remember one of Guild’s successful exits in India last year —the $200-million sale of its portfolio company Pickrr to logistics startup Shiprocket. We try to brings out some of the term sheet clauses that have brought startups like MegaExams, Wink & Nod, MobiChemist to their knees. Among other things, Guild, which runs a few ancillary businesses, expects its investee companies to buy services from its sister concerns. Why? Because it believes its services set it apart from other VCs. Because “capital is commodity”. Because these additional resources are helpful in the early stages of a company’s development. Sound philosophy, but it has not worked out too well for the startups involved. Venture money has acquired many synonyms—"smart capital", "dumb capital", "patient capital"—but there’s a reason why "risk capital" remains the most popular. In Guild’s case, the capital is turning “risky” for some of its early-stage startups.
