Being involved with a startup can be very tricky, investors’ excitement and eagerness to help can very easily turn into a full-time job if you are not careful and do not set boundaries up front. You do not know what to find yourself running the business without noticing, yes we have seen it before.
Startup founders for the most part welcome investors’ involvement over time, and a significant number of them turn into a relationship of dependencies and needs and will blur the fine lines in the relationship. So setting a set of ground rules will help alleviate these concerns and establish a relationship that is clear and workable for both sides.
Establishing a Condition of Satisfaction between you, the investors and the company will address all of the needs and wants of each side. It creates a human contract that is easy to manage and hold into account.
So first you want to define your level of desired involvement:
- Passive
- Semi-Active
- Highly Active
- Intimately involved
You need to know what will work for you and do not try to do anything that is not a true expression of your ability, commitment, and professional competencies. Unfulfilled expectations thwarted intentions and undelivered communications are the main source of upset in any kind of relationship.
You want to include all the core elements of a working relationship:
- Communication – How would you like to be communicated, how frequent and for how long
- Time Management – How free are you, when and when you are not.
- Reporting – How often would like to get performance information, updates and how
- Crisis Management – How do you want to be informed about BAD news and how.
- Time Investment – How would you like to manage requests for help or support?
It is highly recommended for investors to work on incorporating as much of it if possible in the deal term-sheet as part of the negotiations it will make it a binding agreement and measure of accountability built-in designed to eliminate any misunderstandings.
It is very natural to take it as it comes and go with the flow, if you manage 2-3 investments it will work, yet if you are intending to build a large portfolio it will not, it will break and cause upsets and dissatisfaction.
