The Moments that Define Investor and Founder Relationships

In almost every single investment I’ve ever made, I can think of a singular moment in my relationship with a founder that, no matter what came before or what might come after, defined our relationship. Often times, it came in a very vulnerable and down moment for the founder—perhaps they just lost out on a big opportunity, had someone from the team leave, or they’re running low on capital before sales have come around. It happens to everyone regardless of how well the company is doing—because no path to success is a straight line.

While it might be a low point for a VC’s expected return on investment, it might demand of an investor a high point in their generosity and empathy—because a founder is going to remember who was there for them with confidence and motivation, and who either abandoned them or tried to take advantage of the situation.

Not only that, but the venture community is extremely small when it comes to investor reputations. Founders are tremendous advocates for investors who have their backs—but if you put a founder through the ringer unnecessarily, everyone in their circle is going to know about it, if for nothing else because they’ll need to talk through it with others in real time for guidance.

The key to having difficult conversations with founders is setting expectations. The worst thing you can do as an investor is to go back on indications of support or to blindside a founder that you’re changing the strategy around your professional relationship. If you’ve lost the confidence needed to follow on in a deal, that needs to be signaled right away. If you’ve decided not to invest in the first place, you need to say so as soon as you know it so you don’t string a founder along. If you’ve left your firm or have other deals that require more time, you can’t just become a ghost or check out on a founder after negotiating all sorts of legal incentives for the founder to be motivated for the long term, which makes someone assume you’ll be doing the same.

Failure stories are going to be told just as often as success stories—and investors need to make sure that even when the decisions are tough, they come early, consistently, and with transparency, or they’ll be one of the villains in an oft-repeated tale.