Setting Expectations at Funding

Great, so you’ve closed on some cash and now it’s time to get to work—except that now you have all these random people who wrote you checks asking you questions, wanting to know what they can do, introducing you to people, etc.  How do you manage these relationships?

Investors have the same issue.  You met a great team and you want to see what they can do, but you know there’s a great syndicate around the table so you figure that you’re not going to be depended on that much for day to day work.  What happens when everyone feels that way and the ball drops in the middle as if you were a bunch of Pittsburgh Pirates outfielders?  Or, the other way around—you love a team, you didn’t write a huge check, but you absolutely want to add a lot of value and be very involved.  Does the team know that, or did they take your small check as a measure of your interest?

Setting expectations on both sides is critical at the time of the funding.  “What am I getting with this check?”  and “Can I depend on you for x, y, and z?” are the types of questions that need to be asked before anyone signs on the dotted line.  Is the investor going to introduce you to industry contacts?  Will they be a part of board meetings as an observer?  Giving out roles and tasks to particular investors at the outset is a good way to make everyone feel like they’re adding value and not have everyone falling over each other trying to be helpful.

For an investor, one of the best ways of getting started on the right foot is explaining to a startup how best to interface with you around communication—and to ask the entrepreneur the same thing in return.  For example, I’m pretty responsive over e-mail to the companies I invest in when a specific question is asked of me.  Sometimes, I might turn that conversation into a phone call if it needs to be talked out live, or I’ll ask to meet up in person.  When the question is vague, and it is sent out to a lot of people, I might not realize its pressing importance.  Text messages, which one entrepreneur insists on (I vow to get her on Twitter for DMing), might not work as well for important conversation.  Having open lines of communication with good signaling around priority, as well as expectations around frequency, are important to get straight at the outset. 

The last thing any investor wants is to feel like they’ve let down a company because they didn’t know what a company needed from them or did something inadvertent to make them seem disinterested.  In the same vein, entrepreneurs really don’t want to make an investor feel like they didn’t accomplish something they should in terms of milestones because there weren’t clear expectations at the start.