Excerpted from Reid Hoffman:
Sadly, many investors actually add negative value, so an investor who adds no value (“dumb money”) but who doesn’t interfere with the operational process can sometimes be a decent outcome. But ideally you find an investor who can proactively add value (“smart money”).
How do you know if an investor will add value? Pay attention to whether they are being constructive during the pitch and financing process. Do they understand your market? Are their questions the same questions that keep you up at night? Are you learning from their feedback? Are they passionate about the problem you’re trying to solve?