Striving for Constructive Relationships Between Founders & Investors
Building constructive relationships between founders and investors is a challenge, and even in the best situations often involves some necessary push back and discomfort.
Angels and early-stage investors often say: “I prefer investing in founders who …”
“are coachable”, or
“have boundless energy”, or
“are pliant, malleable and flexible”
Investors also want stability, predictability, access to lots of data, and control. Their preference for “rinse and repeat” businesses reflects those needs. Companies that exhibit these traits provide investors with lots of comfort.
Unsurprisingly, perhaps, investors often seek founders who will heed their advice and recommendations with little to no push back. They may not say it explicitly, but what investors often want are founders who are docile yet execution-oriented.
Investors know, in general, that some of the best investments in early-stage companies involve founders who are driven by a startup or business vision. These founders have a sense of both self and their own independence. They are not necessarily “coachable,” in the typical usage of the word.
Left unsaid—but heavily implied—is that investors prefer founders who are single-minded and embody the other important traits noted above, while remaining amenable to taking orders.
I prefer founders who see the earth like an alien from a distant planet:
They think big – like in universal terms – and with a sense of connectiveness
They figure out the algorithm for closing a round of funding—an alien process for neophytes
They gather data and approach problems from different points of view – like an alien would do after first landing on our planet
They build out financials, a technology roadmap, and code, and find customers—just like an alien visitor
They take feedback from advisors, investors, and board members—as if it’s their mission control
They are comfortable working in arduous and undesirable environments—surviving in sometimes hostile environments is a necessity in any explorer
The absence of push back by a founder or team of founders may be a warning sign that:
an investor or board member is over-reaching, trying to solve more than their share of problems
other hidden problems may exist
the unknowns may outnumber the knowns
they may be overwhelmed or unable to address these challenges
…but most importantly,
there is clearly a communications problem
By selecting founders who do not push back, investors artificially limit the pool of partners who could potentially bring their investment to the promised land.
This ability and freedom to push back—in just the right way and in just the right amount—is one of the reasons why the US technology industry thrives. Americans are more open than many other nationalities and, honestly, less polite or tied to traditional forms of respect in the workplace.
It is also one of the reasons why the US tech industry is not as diverse as it could be. Founders who are born outside the country, women, minorities, and other non-standard founders express themselves and respond to questions differently. They are reactive in positive ways, but not seen as pliant, malleable, or flexible.
Some of the best founders also are able to make an investor feel “off balance.” Whether it originates from the founder’s personality, the intensity of the startup experience, or communications, feelings of unease in a certain desirable range can permeate meetings, communications, and corporate culture.
Investors who are looking for founders that play it safe, do things strictly by the book, or don’t push the envelope, are only hurting themselves. Conservative behavior has a place, but it’s usually not until the company emerges out of the startup and growth phases and enters the scaling phase.
Investors looking to maximize the potential of their investments should be comfortable working with founders with whom they can build constructive relationships, even despite getting occasional push back or occasionally feeling off-balance.