A bad investor won’t come with a label saying “I am a bad investor!” So, you have to understand how startup growth happens and the whole arc-story for launching a startup: idea to product, cofounders, struggles for discovering customers, validating customer and the market, ways for productizing the idea, threads and acquisition of new segments, board member selection, and so on. Also don’t forget about good and bad cultures, integrity, and other values.
The sad reality is that it’s virtually impossible to move up without an understanding of the rules of the game: idea, product, market, investment-acceleration and risk systems, etc.
The more you learn, about these other sides, the more you will be able to detect and evaluate your peers. For example, if you meet an investor in the food business, and if she does offer to invest on your new social media app, chances are that you are talking with the wrong person and wasting your time.
Of course, there may be exceptions; but don’t count on the chance that the exception will reveal itself eventually. When Marc Andreessen (A16Z) was asked “How do you know [if] an investor is really good if you are founder and raising money for the first time. “ [Marc @ YCombinator, 2016, 14m11s] he replied with a straight 5 points exploding technique:
Therefore, and to close at this special moment: If you want the smart money, which means to focus in assembling a smart feedback system; make sure you are not hallucinating and don’t fall in the romantic trap of trying to create a self validation system that may well reveal itself as a trap in your future.
Y Combinator, 2016, Marc Andreessen at Startup School SV 2016, Published on Oct 25, 2016 [video] https://www.youtube.com/watch?v=NEOR0AJsziE