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.