Entrepreneurs may cast their venture capitalists in the wrong light. Some aim to avoid them altogether for fear of a difficult conversation. Others view them as their new best friends. Neither extreme is right, neither extreme is wrong. For startup CEOs, here are some tips on how to shape a relationship that is imposed by a company’s need for capital and an investors’ pursuit of return.
Avoid Static. The biggest relationship risk for a founder is under-communication. Failure to discuss challenges, whether sales obstacles or budget requirements, will fuel animosity. “What are you doing with my money?” is not a question that you want to hear as an entrepreneur. Better to talk through communications protocol, than ignore it altogether. How often does the investor want to see written reports? Does the investor want monthly or weekly in-person meetings? In what operating decisions do they want to be involved?
Embrace Their Skill Set. A company founder probably has different commercial experience than an investor. You may have started your company because you are very good at app development. In contrast, your investors could excel at dissecting regulatory trends or sales management. Use their talents. Running your company does not mean that you are expected to do everything yourself. Nor should you. Entrepreneurs, by definition, are learning on the job. Identify and accept limitations.
Explore Commercial Opportunities. Your company may fail. Even those that are well-funded can fall apart. In 2017, we said goodbye to one-time startup darlings Beepi, Jawbone, and Juicero, among others. Think of your investors as insurance policies for future opportunities, treating them with deference and respect. That may mean seeking their help on fine-tuning a business pivot. But it could also mean securing their financial backing for the next version of your company or using their professional network to identify a merger candidate.
Building a successful firm is a tough slog. Venture capitalists can help to mitigate the frustration. But the relationships need to be managed as carefully as ones with trusted clients or key suppliers. An overt, carefree demeanor is likely to derail rapport as much as a secretive, defensive one. ■
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