Who’s in charge?

Every entrepreneur who has ever raised money has been on the receiving end of lots of wisdom, advice and guidance from their investors. Most of the time this is a great thing. The best entrepreneurs can get funded no problem, so who they choose to work with is at least in part a function of the “value add” those investors bring. That value add is often driven by the investors’ past experience. Hence all the guidance.

But what do you do when an investor starts taking charge?

VCs and angels share a common trait: if you are managing other people’s money (VC) or investing your own then you have likely had some success in your life and some great experiences. As a result, you tend to hold strong opinions. For first time founders, navigating these often conflicting opinions can be challenging.

Accelerators offer acute examples of this. By definition entrepreneurs in accelerators are exposed to many mentors. At Founderfuel, we try and match teams up with mentor groups that have diverse and complementary skill sets. But as you might expect that leads to divergent opinions, or what our founders call “Mentor Whiplash”.

It’s easy to dismiss guidance when it’s coming from mentors. But what if it’s coming from investors? What if the investors are on your board? Easy for me to say on the investor side, but I don’t think you should treat their advice any differently from mentors, advisors or anyone else.

According to Eric Ries, a startup is a “human institution designed to deliver a new product or service under conditions of extreme uncertainty”. By that definition, investors don’t “know” everything. Yes, there is more or less one best way to run your back office. You should have a great metrics package installed and should be data driven. You should hire A players, etc, etc.

But you quickly run into real uncertainty. Your profile of an A player may be different from mine. Your definition of a minimum viable product may also be different. You may want to generate revenue early and not be dependent on more outside capital. I may want you to go big and  delay charging your customers longer.

There are so many examples where there is no clear right or wrong and only hindsight will tell you which was the right path.

No matter how value add we try to be as investors, we are not there in the trenches day in, day out. We are not talking to your users. We don’t see the support requests. We are not driving your roadmap, etc. You are doing these things. So you are in the best position to make the calls.

Also, investors want to back great founders. One trait of all great founders is that they are decisive. I would argue that one of the key tasks of CEOs is to make decisions – frequently and again in conditions of uncertainty. While it’s cool to get outside input, at the end of the day you have to make the calls. You are in charge. If you do what your investors /  board want you to do, then even if it works out you may be perceived as a weak leader and the board may be concerned about your leadership. If you do what they want and it does not work out – it’s your fault. Fun, huh?

So, what’s the solution? Treat all advice as “inputs”. Process them and make your own decisions. You should know what’s best. If you don’t and that is illustrated again and again by your choices then you probably should be replaced or move into a different role. But setting that aside, this is the way to go.

As a final thought, there was a study several years ago (by Harvard I think), looking at the traits of successful founders. It concluded that success was highly correlated with founders that made their own decisions, not “yes” people who did what others told them to do.

I’m not trying to incite anarchy or conflict with your investors. Working through issues and trying to help is the most rewarding aspect of this role for me. I just don’t think investors have all the answers. In a World of uncertainty, its up to you to make the tough calls.