Building constructive relationships between founders and investors

This post has been edited from a speech I gave at the Follow The Entrepreneur 2019 Investor Summit in Taormina, Sicily

TL;DR

Once a founder invites an investor to acquire equity in their business, they are making a conscious decision to share in the journey. Their fates are now inextricably entwined. Yet while both regard themselves as champions of innovation, they approach the opportunity from fundamentally different perspectives. This creates an inherent tension, which sometimes results in the relationship breaking down, often to the detriment of the company.

The key is working out how to get the most out of each other.

Founders: Believe in your vision. Your investor is a conduit, not the solution. Their input is a perspective, not the rule of law. Ultimately they will never know more about your business than you do. But, you also have to recognise that you are not the finished article. Like an athlete, winning only comes if you train hard and stay focused, and this means building the right team of advisors to coach you. Your investor has the potential to deliver huge value in this regard, whether that be through their network, pattern recognition across their portfolio or their understanding of financial markets. It’s your job to learn how to extract it! At the end of the day you invited them on this journey with you, and you need them to stick with you to the very end.

Investors: You have huge value to offer, but don’t pretend you’re something you’re not. According to Diversity VC, only 8% of you have ever worked in a startup before! I’ve been in your shoes, before becoming COO of a startup, so trust me when I say it is very difficult to empathise unless you’ve done it yourself! Like a coach helping their athlete be the best, at the end of the day it’s their brilliance we need to nurture in order to make this company great. Be honest about where you have a meaningful experience and where you don’t. And be honest about what you can realistically deliver and what you can’t. Advice cloaked in experience when actually your experience isn’t relevant can be catastrophic for a founder. You have a unique position of authority. Respect it. Even if it means the best thing you can do is get out of the way.

EU venture funding: are we reaching maturity or polarisation?

The venture investment market in Europe is changing. Having spent the last few months out of the UK, it’s become a lot easier to recognise some of these shifts. First, we saw a spike in activity in European secondary markets with analysts expecting a 4x increase in funding activity for 2019. Then we saw Checkout raise their $230m Series A at an eye-watering $2bn valuation (26x their estimated revenue according to CrunchBase). And last week at Startup Grind’s European conference, two highly respected VCs, Jan Hammer (Index Ventures) and Simon Cook (Draper Esprit) took to the stage talking as if they’d just taken a leaf out of the old fashioned approach to investing: if you have an idea and an investor thinks they can make a decent return at acceptable risk, they’ll back you.