Startup Entrepreneurs— How to Deal With an Investor Threatening to Defame You

Startups are really hard and anyone familiar with them knows that the majority of startups fail even when they are started by the most talented entrepreneurs. Unfortunately, some investors invest in startups thinking that the chance of success is 90 percent when in reality the probability of failure is 90 percent for a new venture. Some of these investors unfortunately resort to accusing startup founders of being fraudulent, running a Ponzi scheme, or being criminals when their startup fails and investors do not receive a return on investment! Shame on these investors! Entrepreneurs should be nurtured and encouraged even when they fail because small businesses are the backbone of the American economy.

Failing in a Startup Does Not Make You a Criminal!

Failing in a startup does not make you a criminal and in fact is extremely common! Investors who are investing in a startup should only risk what they can afford to lose and should realize that startups are high risk, high reward investments. I have actually heard of investors accusing startup CEOs of being criminals when they have done absolutely nothing wrong and their business idea simply did not work out. So the question is — what should you do if one of your investors is threatening to defame you?

Add a Non-Disparagement Agreement to Your Stock Purchase Agreement

One preventive measure that you can take is to add a non-disparagement and non-disclosure agreement to your stock purchase agreement. This is something that I do not see enough law firms recommend to their entrepreneurs. I would go so far as to recommend a liquidated damages penalty of $10,000 for any investor that defames you publicly. This will discourage investors from even thinking about defaming a hard working entrepreneur on the Internet. Adding this clause is a completely reasonable request because if an investor is buying stock in your company then they should have absolutely no reason to want to defame you! As a shareholder in your company, they will simply be hurting themselves if they damage your reputation.

Don’t worry if an investor posts something negative about you online

This may seem counterintuitive, but I wouldn’t worry too much if an investor threatens to post something false and negative about you online. Some entrepreneurs might be concerned that this will ruin their reputation, but actually it won’t. If a future investor reads something about you on the Internet and they automatically believe it is true, then that investor is an idiot and not someone you want an investor. The reason for this is that no one should believe everything they read on the internet as the truth without verifying the truth. There are thousands of fake news articles posted online in today’s day and age even about public figures such as the President or CEOs of public companies. You should only want investors that listen to your story and believe in you. Don’t worry about investors who are stupid enough to believe everything they read on the Internet.

Focus on the positive!

Focus on publishing positive content about what your startup is doing to improve the world and don’t worry about false negative content that someone posts about you on the internet. People who believe in your mission will always support you and won’t believe fake news published about you online! Keep working on changing the world my fellow entrepreneurs. You can’t please 100 percent of people.



CEO & Founder at Fruit Street Health

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Laurence Girard

Laurence Girard

CEO & Founder at Fruit Street Health