Do Investors Do More Than Just Give Capital?
Many investors will tell you that they don’t make a difference in the success of a company. Although I have told many founders that if they are successful, everyone will think they had something to do with and if you fail, all on you. I do not believe that investors only impact is putting capital into a company. Perhaps I am delusional but I absolutely believe that my involvement in the investments I have made has made an impact. Years of knowledge on what pitfalls to avoid, sometimes just an outside ear, how to navigate fund-raising, when it makes sense to bring in PR and marketing and what that should cost and look like, how to hire, why getting a coach is important and helping find one, shooting holes in ideas or applauding them. Need I go on?
I do believe that investors can make a difference particularly a strong board. A board is responsible for guidance on behalf of the shareholders, making sure that the company is fiscally responsible as there are fiduciary responsibilities, and that the company is being well managed. It is painful coming to a realization that it is time to get rid of the CEO which in many times is the founder, but that is part of a board’s responsibility to the shareholders if in fact that CEO is not managing the company appropriately. They might be insanely creative and have a vision but then figure out how to keep them involved in that. Management is a whole other ballgame.
Boards do not run companies but if the accounting is a disaster, the debt is high and how the capital is being spent makes zero sense, then a board must step in. As someone who sits on boards and always owns less than the others sitting around the table, it is not easy to push the big guns to push back on poor management. I have sat on boards where there is no doubt that the investors believe that boards do not run companies and have done nothing to help the company steer the ship in the right direction but just somehow believe that it is up to the management to make all the decisions and fix their problems even though they see the books and the lack of good numbers. We might as well be sitting around a bonfire and throwing cash into the pit.
I am obviously venting or perhaps it is my competitive nature but I work hard at helping the companies I am involved in and pulled in to succeed. No doubt that major success is sometimes just a perfect storm but being thoughtful, transparent, diligent and responsible can make a major difference in the success or failure of a company. I have seen too many not have that and if they did, the outcome would have been completely different.
we agree 100%
Some do, some don’t.Some have operational experience, others a career of pattern matching. Both can be great.I’ve always wanted smarter money that came with experience.I’ve always rankled at people who have not experience other than their capital thinking that was a qualification in itself.
I agree with you about observations about how Boards and investors can be powerful positive influencers in a company’s growth. I also think that Boards need to self-monitor themselves. Towards that end, my company has recently begun to conduct assessments of Boards in which Board members can provide feedback and rate one another. Right now, the companies conducting Board assessments are big Search Firms or large consulting companies. Neither has psychological sophistication in either designing or administering 360-Assessment Surveys. So, I guess the post-script to your blog is that both CEOs and Board members need well-designed feedback and coaching to help them become better aligned with one another and help their companies grow.
Having a board is a feature when you put the right people on it. Investors who glad-hand founders are the same ones who blame the founder later.
I’d be interested to hear more specifics on how you feel like you’re most helpful to companies. EG first a (long) list of ‘here’s all the value I as an investor can bring’, and then especially what are the top 3-4 you feel like have helped companies over time.
Help to raise capital from the right investors, navigating the fundraising, thinking about the work org chart at the start, bringing in outside consultants on PR and Marketing, listening, pushing back, strategizing and most of all being available and a support system. Each one that I have helped has been a different experience. Just Works, Nestio, Sweeten, Arternal, Union Station, Venuebook, Apparel Network, Octavia Wellness just to name a few. I think that every founder would back me up here.
I wasn’t asking to ‘validate’ your value add – I’m merely interested in what in aggregate you found to be the top few value adds. I’ve found startups seem to often have difficulty evaluating investor value add since every investor has a long list similar to what you mentioned. Especially if they’re less tangible like providing feedback – all investors mention that type of support and can refer to startups they’ve helped. But it’s one of those things that if everyone says it then founders become wary, even if it’s likely true.I know a few folks have tried to compile a marketplace of sorts around investor feedback, but those usually turn negative quick quickly. It would be neat if one would focus on stating specific added value their investors provided and the outcomes – at least it would be a step toward quantifying which investors really do help in the long run.
It is hard to be specific to each investor. Everyone brings something different to the table. Each company has different issues. I am not sure you can put it down on paper.