It’s been said the average relationship between a founder and their investor lasts longer than the average marriage. In our case, this tends to be between four and seven years. Admittedly, that’s a long time, which is made easier by there being a positive relationship between both the founder and their investor. With this in mind, here are the secrets to a beautiful founder-investor relationship that benefits all…
Set the mood early on, get the chemistry right
A lot of founders underestimate the importance of having chemistry with their investor. Many believe that money is money no matter where it comes from. But this is a mistake that can really stifle a business’s progress and lead to significant disagreements later on.
Over the course of many conversations with an investor in the pre-deal phase, you want to feel a spark or connection – do they understand your mission, are they passionate about being on your journey or are they just taking a punt because they have money to invest and need deals. If you don’t feel that spark from the outset, it’s best to move on.
Open communication is paramount
Founders and investors aren’t going to agree on everything. An investor may feel a founder is moving in the wrong direction whereas a founder might feel their investor is being too overbearing. In these instances, communication can be the difference between moving forward and a relationship breaking down entirely. And by communication, we’re talking about face-to-face meetings where rational points can be made.
Trust is everything and honesty is the best policy
“Establishing an open and trusting relationship from the off is fundamental,” our Investment Director Sim Singh-Landa explains. “If an investor doesn’t know the full extent of what’s going on, how can they help to overcome any challenges in the best possible way?”
Every successful relationship needs a strong foundation built on trust, and that’s no different with investors and founders. Both parties need to trust that the opposite party is working with them.
Again, if there is a lack of trust, it can also impact future fundraising efforts and seriously sour a relationship. Investors talk and are likely to recommend successful portfolio companies to other investors, which can considerably reduce the time it takes to raise money. By that same virtue, founders are not likely to recommend an investor to another founder on the back of a bad experience. In short, it’s a two-way street.
Face-to-face time is seriously underrated
In today’s post-COVID world, where video conferencing and remote working are more prevalent than ever, face-to-face time is rarer. But while there’s no need for investors and founders to be in constant communication, the occasional face-to-face meeting can be incredibly beneficial to all aspects of a founder and investor relationship.
According to psychologists, face-to-face communication is one of the main ways to build a relationship. The reason for this is it’s easier to read non-verbal cues and body language. When this isn’t present, it becomes harder to forge a connection. Given what’s at stake – hefty investment and potentially multiple equity stakes from multiple investors – this is not just important but essential.
If you enjoyed this blog, why not check out the other articles in our VentureVerse series, including our advice for building a world-class culture when scaling or what to do when you’re facing failure, as told by our investment directors.
