I remember having a conversation with my Dad when I became an Entrepreneur in Residence (EIR) at a San Francisco based venture capital firm. The VC firm had hired me to build a company, and we were just about ready to start raising money.
I told my Dad, “We only want to raise money from Tier 1 VCs because they will bring so much more to the table than Tier 2 and Tier 3 VCs.”
My Dad said to me, “Brett, everyone’s money is green.”
My Dad was so right. Investors are just that, investors. You want their money and their support. Anything else positive is a bonus.
I remember feeling very nervous before our first board of director’s meeting after we closed our funding. Dave, my advisor and coach, had suggested that I meet with each investor and board member 1:1 before each board meeting.
But I still worried and wondered what we would discuss in these meetings. Would there be deep strategic discussions about the direction of the business? Would the board meeting last six or eight hours?
My investors were experienced investors from arguably Tier 1 firms. I think they got, and I got, much more out of our 1:1 meetings than the board meetings. The board meetings had the feel of a necessary evil, something you had to do, but the meetings were of little value.
You want to get in, get out, and get done.
I remember asking Gill, one of my investors, in one of our 1:1 meetings if we should have a strategic discussion in the board meeting about the direction we were taking. Gill said, “Well, we can do that if you like. But you need to have a clear idea of what you want to do.”
In other words he was saying, “Don’t expect us to solve your problems because you might not like what we come up with.”
As time went on, I realized the true value of our board meetings was giving our board a chance to interact with the executive team. That was not at all what I would have expected, but that’s what it was.
I made a huge effort to never, ever surprise the board. I think the transparency helped us build trust. Beyond that, I felt our board meetings were something we had to do. Get in, get out, and get done as fast as possible was my goal.
You should expect your investors to provide you with strategic advice.
I was fortunate to have two experienced investors, but their styles couldn’t have been more different. It was, as Regis McKenna told me (he was an advisor to Gill’s fund and he had worked with our other investor “Raul”) “The yin and the yang.”
Gill liked to gently guide me. Raul liked to dictate. But for the most part, they just let me run the company as I saw fit. They were almost like guardrails.
And that’s as it should be. You are the CEO. It’s your company to run.
It’s your company, so you are under no obligation to follow the advice.
For example, I felt we needed to get a loan to extend our runway before we raised our next round of funding. I had Tina, our controller, work with Silicon Valley Bank to arrange the financing.
I obviously needed our investors approval, so I spoke with Gill and Raul in our 1:1s. Raul agreed with my decision instantly, but I was surprised that Gill was against the idea.
“We’ve seen eye to eye about everything until now,” I said.
“I know,” Gill responded. “I think you’re better off just raising the next round. However, I’ll support you if this is what you want to do.”
The most powerful thing your investors can bring to the table is their support and alignment with you.
That’s what I loved about Gill. He understood that it was your company to run as CEO, not his. Every step of our journey together, he supported us.
Alignment. That’s what you really, really want from your investors. When you have alignment, you can move mountains and build a really great company.
When you don’t have alignment, it’s like you’re fighting a world champion boxer with one hand tied behind your back. Just remember that investors are not your friends, they are investors.
As my Dad said to me, “Everyone’s money is green.” You just want to make sure the money keeps flowing.
For more about the dark side of dealing with investors, read:
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