All things being equal, I’d rather invest in a company that didn’t have problems. Reality being what it is, every company has problems.

However, some problems are manageable, fixable, predictable and acceptable. Others only open the path to new problems.

Here's one: Companies that are spread out over multiple geographic locations. Usually this is done to accommodate the founders, who don’t want to move their families/homes. This is a difficult hurdle to overcome, and one that can cause more problems when “solved”.

Meetings/phone calls/email/Instant Messenger they’re all ways to keep in touch. But most knowledge and information is transferred in the hallways, during coffee breaks, or while grabbing a bite to eat. No one ever has all the information at their fingertips, it’s always a bit of searching or remembering. Having only one opportunity to communicate limits the kneading of information that’s required for someone to pick up the full impact of the knowledge.

Investing in a company that has 5 members of the team spread out in the corners of the nation, and one guy in middle America starts off with a communication problem, tacit knowledge is difficult to transfer under the best conditions, and impossible to transfer over email.

What about getting the investor to pay to move everyone together, into the same office, and going forward from there? Probably not going to happen. If the founders don’t believe in the business enough to get together on a daily basis, then why should an investor put his money in first? Why is the team allowed to play it safe, when the investor is forced to take the risk?

And then the nightmare scenario; IF the investor puts up the money to bring everyone together into the same building, the team then realizes that they really don’t like each other, or can’t work together in confined spaces. This kills small companies, and yet, every early stage investor KNOWS that the team who walks into their office the first time, will NOT be the team that takes the company to exit. Something always happens to someone.

In a 5 man team, lose one person, and the organization is effected. If nothing else 20% of the company has just walked out the door.

How to avoid this? As an investor, don’t invest.