Founders and VCs will admit that the founder-investor relationship can be difficult. Some even say it’s hostile at times, but this couldn’t possibly come from both parties wanting the best for each other. There are ways to make these negotiations work.
The venture capital industry has a tendency to attract those with backgrounds in finance, management consulting and even investment banking. This is because they tend toward the logical rather than emotional side of things, their empathy levels are consequently lower when it comes time for them make decisions as founder.
Values and Expectations
The difference in mindset and value between investors and founders can be a major source of conflict. Alignment is a key to success for this relationship – long term VS short-term thinking, straightforward VS politics “behind your back” when you’re not looking; it’s about active help versus blame distribution.
In order to have a successful founder-investor relationship, you need to align your values and establish the right expectations from both parties. The second step in this process is risk management –understanding what risks are involved for each individual before committing fully into it together as partners on an investment or business venture.
Investors should always remember that the founder is at center stage. It all begins and ends with them – without their vision, there will never be any success or happiness in an organization. Unfortunately this isn’t how things usually go down for investors who try too hard to act like entrepreneurs themselves instead of remaining neutral patrons (and advisors). They might even try telling founders what direction they should take on projects when only time knows best.
Building startups can be messy and hiccups are inevitable. So how does the founder tackle challenges along their journey? The first step is to accept that there will always be topics on which you disagree. Before hurrying off telling your partner is wrong or not understand you – try understood first. Honesty & integrity form a foundation for everything we do in life – especially building companies from scratch together as partners.
The entrepreneur’s number one priority should always be to create value for the company and win over its customers. And when he has plenty of issues with his team or investors, it becomes difficult to focus on what’s really important: creating great products that people love.
The Dynamics of Investor-Founder Relations
A VC partner can be a huge help to founders by guiding them through the many unknowns and bringing down their anxiety. Entrepreneurs are often very insecure. So it’s important that they have decisions made for them before going into intense talks with other people in order ensure success rate of projects being backed by investors.
What better way than having someone knowledgeable give advice on which path might work best?
It is important to understand the dynamics between entrepreneurs and their good partners. One aspect that predetermines success in this relationship is a perception. It also well-depending on who you are asking: whether they will be an “elite racer” or need some help with learning how fast things can grow; whether either party sees themselves at fault for any issues arise during growth stages. Because everyone has room improve upon what he/she does best while also becoming more knowledgeable about other aspects critical towards running a business successfully.
The investors are there for you when things get tough. They aren’t afraid to tell the truth, even if it’s not what they want or expected. If an investor starts raising questions about your numbers early on in a funding round then take note – this might be because he/she suspects that something isn’t right with them (and likely will come up later).
There are many components that go into nurturing a meaningful founder-partner relationship, but when you have the right attitude and commitment from both sides it becomes much easier. Honesty should be at center of any conversation as well because without these core values there can never truly be harmony in business.