Founders need funding to expand their businesses. Investors have the funds and they are willing to invest in businesses or startups that are scalable, innovative, and have a very high social need.
As such, founders that accept investor money must have it at the back of their minds that they will lose some level of control. They cannot independently make decisions that will impact the future of the company without the full knowledge of the investors.
Oftentimes, the investor will appoint someone they trust to join the board of the firm or play a major in the day-to-day running of the company.
So, there is a lot of baggage that comes with accepting money from investors. If you decide to collect investor dollars, it is very important for you to avoid clashes with your investors as a founder. Here are some strategies to deploy.
Remember that you have the same ultimate goal
Ultimately, both you, as the founder, and your investors want your business to succeed. You may have different reasons for that desire — your investors are probably more committed to seeing your business make the money they were counting on when they chose to invest, while you’re likely more emotionally invested in the solutions and effort you’ve already put into the business. But ultimately, you’re trying to achieve the same thing: a business that can create and maintain a place for itself in the industry. No one wants to see your business fail. When your investors do offer advice or even criticism, they’re hoping to help you meet your goals.
Listen carefully.
Because founders are so emotionally invested in your business and its outcome, it can be difficult to simply listen during a meeting — especially if you’re passionate about the changes you’re hoping to make. Instead of reacting automatically, often with frustration or anger, take the time to listen to what your investors are really saying. If needed, think it over before issuing a response. Often, you may find that your investors have some great suggestions or some great reasons for holding off on specific advancements or funds. Before you can make that realization, however, you must often disconnect from the discussion emotionally and take a closer look at what has really been said.
Clarify your role and the role of the investors
To prevent or avoid any kind of clash, it is essential for founders to clarify your role and the roles of the investor. How many years will you run the business? What is the process of decision-making? What is the reporting line? How will revenue be shared? What should be done in terms of low-performance? What will happen if the business wants to seek for more investment and investors? To make it easier, you must get an advisory firm to take you through the whole process.
Showcase your successes
It’s important to keep your investors’ perspective at the forefront whenever you interact with them. While they are partnering with you and invested — particularly financially speaking — in the success of your business, they do have a slightly different perspective than you do. When interacting with your investors, especially if you need approval for spending or need to embark on another round of fundraising, point out your successes. You can do this obviously — starting the meeting with a series of announcements about what you’ve accomplished since the last time you came together, for example.
Generate a solid plan before asking for future funding or to take the next step
Sometimes, your investors may balk, not because they think that you aren’t capable of succeeding or that your plans won’t bear fruit, but because you don’t have a solid plan to present to them. You have goals, but how are you going to accomplish them? You want to move forward with the next steps. What do those steps look like? Where are the funds coming from? Are your plans profitable? Your investors want to know that you’re being a good steward of the funds they’ve already invested and that you will continue to show good stewardship of future funds invested in your business. Before you jump in and start trying to rush forward, create a clear plan of action that will help show your investors exactly what’s coming next and how you plan to implement your next round of changes.
Take things one step at a time
When you start seeing successes, you’re often eager to jump ahead. While it’s not a bad thing to be eager and excited about the future of your business, you’re investing a large chunk of your life into these efforts — it’s equally important to understand the process and follow it. Entrepreneurship isn’t about waving a magic wand and making your business work. It’s about the effort you put in day after day, sometimes year after year. You can’t skip steps, nor can you ignore the process. Instead, you must follow the right steps. Your investors will be much more likely to get on board when you follow the process — and in many cases, you’ll find that simple willingness to follow that process can make it easier for you to meet your overall goals.
Utilize investor advice.
If you want to create a more effective relationship with your investors, founders should take advantage of the advice they’re giving them. Remember, you’re all on the same team here. In many cases, your investors are offering solid advice and perspective on many of the issues that may crop up with your business over time. Take advantage of that advice. Use it. Look for ways to implement investor suggestions, especially those that do not involve excess funds. You’ll find that when you’re willing to listen to your investors, it can often transform your overall relationship with them and make them more likely to trust your desires in the future.
