Last week, I heard the word “difficult” describing investors twice. Once was about me and once wasn’t.
The founder and investor relationship is, in fact, a difficult one to get right. Both sides walk in with a lot of cognitive biases and style differences unique to every pair. Meanwhile, the work of trust building is hard and takes a long time.
In one instance, there was an investor holding up a round after agreeing to sign off on something verbally. They weren’t wrong about the term in question, but the dollar impact to their investment was so small that it wasn’t meaningful to a fund of their size. That’s the kind of thing where you have to choose between being right and seeing the bigger picture in order to facilitate a transaction that was good for the company.
No one wants that kind difficulty in an investor and it frustrates me on behalf of my founders to see that.
That being said, I can be difficult in other ways.
On my side, I was told by a founder that they found some of our interactions difficult–a little too blunt without enough understanding of where the entrepreneur was coming from, doing all of this for the first time.
The most successful founders have often told that they’re crazy or stupid or both on many many occasions on their way up–and none of that helped them get there, at least, not on a productive way. It’s important as an investor in the company to make sure that when you have constructive feedback, it comes with support and respect. Founders are going to hear a lot of naysayers from the outside, and so when you’re on board with the company, you want a founder to feel like you believe in them personally, even if you disagree with them.
This isn’t always easy.
VCs get the benefit of having worked with dozens and dozens of companies–and so it’s easy to have a dismissive reaction to what you might see as a bad course of action, without realizing that the founder doesn’t have the benefit of your experience. Not only that, but a founder is basing their decisions on a lot more information than you–so while you’re concerned about the what, perhaps you should be diving deeper into the why before you react.
Being a founder can feel like driving a car for the first time. You’re nervous enough–the last thing you need is a parent yelling at you for clipping the curb with the back tire on a turn.
Doesn’t mean it isn’t hard to freak out when you’re a passenger in that car when you hit something!
Still, it’s something I need to work on more.
At the same time, there’s also a “good difficult”–being willing to deliver tough feedback or pushing the founder to do difficult things they’d rather not do that are better for the company in the long term.
This is something I’m unapologetic about.
I can think of a few instances where I’ve been “difficult” and I think ultimately it was better for the founder and the company.
For example, I’ve been putting in a spending clause in my term sheets lately, where above a certain one-time spend triggers a conversation. The founder can spend whatever they want whenever they want, but we just have to talk about it. It’s a seed round, and so it winds up happening around hires, rent, and contracts with agencies or lawyers most often.
Some might see that as a pain because other investors won’t ask for that–but it’s already facilitated a lot of great conversations.
For example, it helps to hear why you’re hiring who you’re hiring early on. I want to understand your thought process and make sure that you have a method to salary and equity compensation. That’s not only good discipline, but it helps me figure out who to send you to help with recruiting in the future, because I have a sense of how you evaluate candidates.
Still, it’s always your call.
Communication is important to me. The more I know about what’s going on, the more helpful I can be–and everyone’s got blind spots. (Especially your investors!!) Sharing more with your investors is critical for founders because the number of things a founder has to keep an eye on is overwhelming. It’s just good practice to have a few people around asking the right questions at the right time.
It doesn’t mean they don’t trust you.
They’re being difficult because being a great founder and building a great company doesn’t come easy.