When you think about the qualities that every successful startup must have, you’re likely to think about having a great team, a great CEO, grit, an exploding market, a great culture, and a friendly competitor. There’s a lot to choose from.
But there’s one quality that you absolutely, positively have to have. Can you guess what it is?
Every successful startup has supportive investors. Every. Single. One.
If you have ever lived through having unsupportive investors, then you know just how disruptive an unsupportive investor can be. An unsupportive investor can literally kill your startup. And, the frustrating thing about dealing with an unsupportive investor is that, until they stand down, you can’t go forward with an unsupportive investor.
That’s what I lived through. One of our investors, “Donald Ventures”, blocked every term sheet we received. They literally wanted to force us to shut down.
It wasn’t until we asked Silicon Valley Bank, whom we had a loan with, to help us that Donald Ventures stepped back and allowed us to close our funding.
You don’t need much for an investor to be supportive.
Here’s what I’m not saying defines a supportive investor.
A. A supportive investor doesn’t have to provide strategic advice.
Yeah, it would be nice if your investors shared their wisdom with you. And most investors will share their wisdom, whether you like it or not.
But quite honestly, you don’t need their business guidance to be successful. And…
B. A supportive investor doesn’t need to help you to recruit.
Help with your recruiting would be nice too. Especially, if an investor knows an executive that might be able to help you.
However, you should be able to recruit your team without your investors help. Plus, sometimes investors can recommend a really bad hire, and it puts you in a weird position with your investors. Finally…
C. A supportive investor doesn’t need to be your mentor.
Mentorship is really helpful to you as a startup CEO, but you have to be careful with your relationship with your investors because, after all, you work for them. You can find mentorship from other, outside sources.
Money is the only thing you need from a supportive investor.
Keep writing checks and let you run the company. That’s it. That’s all you need from your investors.
Yes it would be great if your investors provided you with strategic advice.
Yes it would be great if your investors helped your recruit.
Yes it would be great if your investors mentored you.
But you don’t need any of these things to have a successful startup.
Your startup will have a chance to succeed as long as you have the financial support of your investors, and, this is very important, they aren’t disruptive.
Then, you’re free to run your company.
You can fix just about everything else but a non-supportive investor.
Now, I’m not saying that you should want to have any of these problems. However, most problems you encounter are fixable.
Can you fix a bad team?
Of course you can. You can replace employees that aren’t working out.
Can you fix a bad CEO?
You might not like it, but you can be replaced too. There’s always someone else that can run your company.
Can you fix a bad culture?
I’ve written about the importance of having a great company culture more than anything else. However, you can still win with a poor culture.
And, if you’re smart, you can fix and improve your culture too.
But it’s virtually impossible to fix an unsupportive investor.
You’re likely stuck with your investors for life of your company. It doesn’t matter whether you and your family are the investors, you have angel investors, or have VCs as your investors, you can’t survive with an unsupportive investor.
So choose your investors wisely. It’s likely the most important decision you’ll ever make.