Entrepreneurs have an incredible backstop of management experience and wisdom available to them that, too often, they ignore. Why don’t startup founders make more use of their investors?
Many entrepreneurs are hesitant to ask advice from funders. Would doing so, they wonder, signal weakness? Conversely, I’ve heard investors say they wish the leaders of their portfolio companies would be more transparent about challenges they are facing and ask for help. As one investor said to me, “They already sold me on the business and have our money. It’s now our firm’s job to help them succeed.”
In an informal Twitter pollI recently conducted, 56 percent of entrepreneurs who responded said their most common ask of their investors is for hiring help. Second to that (31 percent) are asks for introductions to potential partners or customers, and a small percentage (13 percent) tap their investors for financial management advice. But startups often run into issues outside those categories, everything from what to ask potential hires in a job interview to analyzing sales funnels. Experienced investors have likely run into those issues many times over and are happy to share what they’ve learned.
“Good entrepreneurs are learning machines, so they’re always asking for advice and guidance from multiple sources of expertise, including their investors. In fact, the best founders are outstanding at squeezing every bit of insight, advice, and contacts from their network of investors and advisers.” Jeff Bussgang, general partner, Flybridge Capital
Do you know how to get the most from your investors? Below, I have outlined the basic asks (table stakes) as well as suggestions for deeper asks.
What to ask for
- Referrals and warm introductions
- Posting job links on their websites
- Invitations to recruiting events
Beyond the basics:
- Seek examples of job descriptions (JDs) and critiques of those you’ve written. Most investors were operators once and have a good sense of how to write a good JD. Investors may also have a recruiting arm at their firm who can counsel you on specific searches. [See point on compensation in Financials, below]
- New to hiring? Practice interviewing candidates with investors or their associates before bringing actual candidates in for the real interview.
- Resume screening can be an easy ask and a quick job for someone who’s seen 100’s if not 1000’s of resumes. Experienced eyes can point out immediate red flags and give you specific areas you may want to probe for a particular candidate.
- Invite an investor to help diversify an otherwise homogeneous interview team. This can be a game changer for a candidate who may otherwise feel like they are a token hire. Knowing the extended team around the business is diverse, can allay these concerns.
- Ask your investors to help sell the business to prospective candidates. This can be especially critical if you’re trying to hire a senior team member or a start-up first-timer.
- Investors can offer insights on how your company is perceived as a workplace from their own perspective or from feedback they’ve garnered in the market.
- Finally, but very carefully, investors may be able to help you get backdoor references on potential hires. I wrote more about this particular topic here. Backdoor references can be helpful, but only if done correctly.
“This is something we continue to do, even with mid-level hires in mid-stage companies when the founder feels like a highly desirable candidate could use an extra push. It’s not a huge burden on our side, but can have a very strong positive impression on the candidate who probably feels like getting board/investor visibility is a strong positive in their career development.” —Rob Go, partner, NextView Ventures
Marketing, sales & partnerships
- Introductions to potential customers and/or partners
- Putting your company logo on their website; putting their firm’s logo/board member on your website
- Invitations to marketing and sales events
- Tapping their social media presence for sharing news and events
Beyond the basics:
- Investors look at markets all day, every day, and have an objective perspective on not just current market forces, but patterns over time and how markets move and customers buy. They may not know your specific market details or the intimate buying patterns of your target customer, but as Bob Mason, managing partner of Project11 says, “We often ask the right questions informed by our opportunity to step out of the day to day urgency of running the business. We have enough knowledge to understand the big market forces, see patterns from other businesses, and can help drive an engaged dialogue. For the engineering-centric founders, you can think about this as ‘debugging’ an issue. When coding, you might bang your head for hours trying to find the root cause of a hard bug. But you bring over a colleague and talk through the situation and often a solution will appear. They didn’t tell you the answer, but the process of conversation brought insight to your mind.”
- Whether you are building an enterprise product and need access to a buyer inside a potential large customer or trying to develop partnerships for your business (B2B or B2C), investors can provide invaluable insights on what drives particular companies, who the “real” decision makers are, and how their buy/partnership process works. Investors can reach out to execs at companies and get an early feel as to how important such a potential deal or relationship could be.
- Investors are generally good at analyzing marketing or sales funnels. If they are former marketers or sales people, they should be able to help you understand the “magic moment,” points of stickiness, drop off, etc. They also won’t have the biases you likely bring to the table and can look at the numbers objectively.
- Investors can be helpful with developing your company and product story, as well as speak with folks in the industry to see how the story resonates.
- Beyond offering advice on digital marketing and leveraging social media, your investors may also be helpful with brand awareness and offer PR opportunities. Perhaps they are sponsoring an event where you or a key member of your team can be a speaker. If one of your investors is a blogger, ask for a mention in their next blog post about a topic you’ve been discussing, or perhaps even a guest blog spot. Be creative about how your investors can help shine a light on your brand, product, and team.
- If they can use your product as a firm or as individuals, they should. Whether it’s for testing the MVP or to dogfood the brand, no excuses. There’s nothing more compelling than an investor who offers you a cup of coffee made with one of their portfolio company’s new beans or the investor who has a “powered by” one of their companies on their website. Have you asked your investors to use your product?
- When asked (or not), investors never lack for advice on how your product can improve. Just remember, you are in it every day, they are not. So, always weigh that advice against what your team is discovering with your customers and progress accordingly.
Beyond the basics:
- If your investor is a former operator, especially at an early stage company, odds are they have built/tested many MVPs. Engage them in the MVP discussion. Review product priorities and test plans. Again, their objectivity and experience could give you a fresh perspective. This will also help them understand the tradeoff decisions you are making and can be very informative when it comes to strategic thinking about the company’s product roadmap and long term direction.
- Speaking of roadmaps, if you’ve got a former head of product or VPE on your investor team, invite them to a planning session. For the same reasons as above — fresh perspective and added insight when it comes to bigger picture discussions.
- Security and compliance are often overlooked and where investors can probably draw on their own or other resources to ensure your company doesn’t get tripped up on a sale or regulatory issue because an “I” was not dotted or “T” crossed. They may have access to pen testers or be familiar with compliance requirements for things like PIA, HIPPA, or SOX through other portfolio companies’ experiences; even if it’s just asking when to worry about it vs. holding off on investing in this work.
- Tap investors’ technical EiRs and/or network. When I was CTO at DigitalOcean, it was amazing to have someone like Martin Casado at a16z, our lead investor, to bounce ideas off of and even help us with some tricky architecture decisions. Similarly, my friend Jocelyn Goldfein, managing director of Zetta Venture Partners, said she’s often tapped by her portfolio companies to help with developing data strategies and answer questions about data rights. Find out who the experts are in these firms and they’ll probably love the opportunity to get into the details with you since it’s no longer their day job.
- If they are involved with financial planning, investors should be helpful with basic headcount and organizational growth plans (what roles to fill, how many, and when).
- Investors are generally not shy about telling you (sometimes unsolicited) if they think a key employee they are interacting with is great, needs coaching, or may not be successful in your organization. Just remember, if you have a board, other than the CEO, they don’t make hiring or firing decisions. That’s your job.
Beyond the basics:
- Whether they were former operators, or have just seen a large number of companies operate, investors can give helpful insight around people and culture. You can ask how to work through team challenges, enhance your company culture, or even how to make remote teams work. If they’re not the experts in these areas, they likely have companies in their portfolios that are doing creative things or learned from mistakes and are willing to share tips and tricks to avoid pitfalls as you scale.
- While it may make you feel vulnerable, asking your investors for guidance around your own personal development demonstrates your willingness to grow — especially if you are a first-time CEO, or other member of the C-suite. I’ve seen investors coach leaders on everything from how to lead their teams and handle challenging employees to how to run a great board meeting. I’ve also seen investors support and sometimes even pay for executive coaches and training programs for high-potential leaders.
- Beyond headcount and budgets, investors with experience leading teams at scale can be very helpful with how to think about organizational design through various stages of growth. Investors can also have a really good sense of leveling across organizations and have seen a lot of creative approaches used across companies.
“Drop your shields. If you think asking for advice or help from your investors is showing signs of weakness, you have it all wrong. Your investors are by definition already on your side and any problem you are facing or any area of growth where you think they may be able to contribute to or connect you to someone who can be helpful, go for it. I want leaders to ask me ‘What am I doing wrong, where can I level up?’” —Reed Sturtevant, general partner, The Engine
- Investment checks
- Future rounds—financing strategy, valuation, etc.
Beyond the basics:
- It’s never too soon to get “budget religion,” especially if you have a capital-intensive business where you need to figure out working capital, financing with manufacturing, etc. Ask for guidance on how best to manage your funds and how to track, burn, and prepare data for future financing to make the diligence process easier for new investors. They may even have models or frameworks that other portfolio companies use that you can borrow.
- Not sure whether your compensation packages are competitive or fair? Or how to think about equity vs. salary splits? Comping your sales team? Your investors have probably seen many different configurations and can help you get creative if you’re trying to land a key hire or to retain and motivate your current team.
- Other financial areas where investors can be helpful are ways to think about marketing spend as a ratio of investment in engineering or sales/revenue, pricing models, and tax considerations.
In all of the above cases, if your investors can’t help you directly, odds are very high that they know someone who can. Good investors won’t expect you, especially if you are a first-time founder, to figure it out all by yourself. I always appreciate the humility that comes from anyone who knows what they don’t know and asks for help. It is impossible for anyone to know everything.
How to ask
There are three ways every founder should interact with their investors outside of board meetings (if you have them).
- Investor update emails are always a good vehicle for asks. If you’re not sure if anyone on the investment team can be helpful, be specific: “Looking for advice on digital marketing strategies” or “Would love to talk with someone in your network who can advise my team on HIPPA compliance.”
- Routine one on one calls or meetings are a must. This establishes a good touchpoint with investors to create a rapport and catch up informally instead of waiting for a crisis or issue to arise as a reason for a call. I suggest you always have at least one ask for these meetings and always follow up with a quick email with that ask in writing.
- Identify at least one domain area where each investor may serve you best (e.g., I am usually the go-to person for product & engineering or organizational planning for my angel investments and advisees). When the needs arise, set up face-time to dig into that specific topic with that investor.
Remember, your investors are not just here to provide cash. They are invested in you and your company’s success. As Jason Seats, CIO of TechStars says, when in doubt, “pretend that they are not an investor and figure out what you’d ask them. If you can’t come up with anything, they may not be a good investor for you.” This can also be a nice hack around targeting the right investors from the start.
Do you have other examples of ways your investors have been helpful beyond their funds? Please share in the comments
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