Good investors will be on your side

Last week I had a conversation with one of my portfolio companies, one I hadn’t spoken to in a while.  He wasn’t great at communicating over time, and honestly, neither was I.

When I asked him how it was going, he broke down in tears and unleashed a torrent of issues on me.  The biggest issue was the death of a loved one which was traumatizing to him, causing him to evaluate his own life, and deciding that being the CEO of his company wasn’t where his heart was anymore.  But there were a series of other issues that had been going on for a while, including some operational mistakes, and some fighting with one of his other key investors.

We spent a long time talking about possible solutions for the businesses (hire a new CEO, sell the business, etc).  We also spent a lot of time digging into why he felt that his heart wasn’t in it – he felt that he was in over his head (most entrepreneurs I know feel this way).  We talked about possible solutions for him, individually to find peace.  By the end of our conversation, he expressed remorse at not coming to me sooner.  He was afraid of how I would judge him.  Yet he was relieved when all I did was support him.  I gave him some guidance on how to talk to the investor he was fighting with – which was basically just be honest, open, and vulnerable.  This founder left my office, headed straight for that investor’s office, had that difficult conversation, the result being the investor is now trying to help the CEO navigate this tough time.  The CEO turned an antagonistic relationship around.

I see this behavior happen often, where CEOs are afraid to come to their investors.  Maybe they’re afraid of being judged, or what the investor will say, or developing tension and friction in the relationship.  But any experienced early-stage investor will tell you that bad stuff can, and will, happen to your company.  We don’t think the world is perfect.  In fact many angel investors get involved just so they can help entrepreneurs figure out problems.  But hiding issues, or glossing over them, not communicating with your investors about what’s working (so we can celebrate with you!) and what’s not working (so we can help you figure out how to solve it) is detrimental to your startup.  We’re on the same team as you, we want what’s best for your startup.   If you find yourself in an antagonistic relationship with one of your investors, you should be asking yourself a) in what way am I contributing to this relationship being antagonistic, and b) did I do enough homework on this investor to know if they have a pattern of bad behavior with an entrepreneur.  Notice that both the subjects there are you, the CEO.  Not the investor.

The earlier we’re brought in the circle of trust, the earlier we can help fix what’s wrong.  Being honest, open, authentic, and vulnerable with your investors is an advanced skill that every entrepreneur should learn.   Communicating regularly with your investors about the highs and lows is a reflection of how open you’re being.  It could just mean the difference between success and failure of your startup.