According to Paul Graham of Y Combinator, you shouldn’t be scared or even defensive if an investor is aggressive about finding out your reputation amongst other investors; he/she is basically just admitting they’re mediocre at their job.
Investors take cues from superior investors the same way benchwarmers crib the workout plans of All-Stars; even experienced VCs might as well be flipping a coin when picking out successful startups. In fact, judging by Fred Wilson’s data showing most VCs can’t even beat a standard market index fund, most VCs might as well be playing Russian Roulette…with five bullets.
Of course, there’s math behind all this to — ownership in companies becomes inherently more valuable once they’ve raised cash. If you’re one of the lucky few who has to choose between investors, Graham suggests only raising the equity price for investors whom you wouldn’t mind losing: most VCs hate dealing with sudden price jumps when making deals.
And finally, as Graham suggested in his previous post, don’t feel the need to lie to pushy investors; “make the truth good, then just tell it.”