Over the next few months, I (Immad Akhund, CEO of Mercury) will share my stories, learnings, and tips for other leaders based on what has worked for me. I started my entrepreneurial journey 16 years ago as a recently graduated engineer and have had to learn all the “CEO” lessons the hard way — often feeling like I was making it up as I go. How one leads as a CEO is extremely dependent on any number of factors, like your style, your company, your stage, or your industry. Rather than taking these ideas as ones to copy verbatim, take them as food for thought — one example to learn from amongst the many.
In this issue, I share my thoughts on how to build a healthy relationship with your investors — including treating it as a partnership, rather than creating an imbalanced dynamic.
Something a lot of founders forget is that investors are in service to your company. There’s often this tendency — especially for younger entrepreneurs — to treat investors like a boss. It feels natural because these are the people who control the money, they’re the ones with more experience and a lot of knowledge to tap into.
The problem is that it’s human nature that if you’re treated like something, you end up becoming that thing to an extent. If someone comes to you and asks you to tell them what to do next and to basically make a decision for them, you might take on that role of making the decisions or steering the ship.
There are three problems with this.
- Firstly, your investors don’t actually work at the company. They see you pretty infrequently and don’t necessarily know the day-to-day of your business well enough to really tell you what to do. So delegating major decisions and responsibilities to them just puts you in a position where you’re not really thinking about the bigger picture when you should really be thinking about their advice as one of many data points.
- Secondly, treating investors like your bosses creates an odd power imbalance that creates problems rather than solves them. You see this in situations where founders are fired and board members take control. The existing system already grants the board authority to remove founders - regardless of whether you regard them as your boss or not - but you shouldn’t perpetuate or reinforce any inherent imbalance by leaning into it. Otherwise, you kind of abdicate the power you do have and can lose the confidence of your board.
- Thirdly, it can create a toxic relationship. A lot of the time, founders say that boards are not useful or that they’re onerous. But I think in those cases, it’s because founders have created that situation. You’ve created a situation that’s less about deep discussion and open communication and more about seeking praise or validation from the investors. You present a really rosy picture and try to show that everything is going great because you are trying to impress this “boss” figure you’ve created.
What you end up with is a founder-investor relationship that just isn’t very constructive. And as an investor, I can confirm that being treated like a boss or parent isn’t really what most of us want. I personally dislike it when I see an investor update or have a conversation and it’s just all very positive. It gives me pause and makes me wonder what’s actually going on in the business — because we know that things aren’t always great all the time. So you end up not taking founders seriously when they approach your relationship this way.
The thing that actually creates a constructive relationship is making it a partnership. If we go to the example of a well run board investor dynamic, the positive alternative to that interaction is going into a board meeting with something like a quick progress report but then focusing the conversation more around the problems you’re tackling next, and picking your board’s brain about how to address those things. These meetings should feel less like a long, in-depth status update and more like collaborative working sessions. It should be authentic, more than anything.
Obviously, none of this means that you go into a board meeting without doing any preparation, but you should prepare for a conversation and collaborative exercise, not a rosy broadcast.
To set the tone for a balanced founder-investor relationship early on, I think it’s really important to shift mode straight after closing an investment. The process of fundraising is unique — you’re trying to create a sense of FOMO, you’re putting your best foot forward, and you’re essentially selling your company. But once you’ve closed a deal and the money is in the bank, it’s good to have a meeting with the investor and just have a very authentic interaction. Grab lunch and pick your investor’s brain on your main challenges and what you’d love input on. Talk about higher-level ideas in a relaxed setting, and start building the foundation for a partnership. Do these meetings regularly — plan catchups between board meetings, either in person or over the phone, to ensure that you’re building a relationship that feels solid and less transactional.
Every conversation should feel like an honest, balanced discussion. In the end, you’re the CEO and you have to take responsibility for what you do for your company, with every other person acting in service to that.