There are many similarities between the healthcare ecosystem and the startup ecosystem. Just like there are lots of patients who line up to see a few doctors, there are lots of founders with great ideas who are chasing a handful of investors who have tonnes of money. To this extent, founders resemble patients and the investors play the role of the doctors.
Founders approach investors for money and it’s the funders who decide whom to give money to (whom to treat, in one sense), and whom to refuse. The dynamics of the founder-funder relationship are very similar to the doctor-patient relationship because they are both characterised by power and information asymmetry.
This is why founders feel vulnerable and exposed. It’s true that at first blush, it appears that it’s the investors who have all the power because they have all the money. As the golden rule says -he who has the gold makes the rules.
Related Article: Why Founders Don’t Trust Funders
There are enough horror stories of naive entrepreneurs who have been cheated by investors. They have been made to sign term sheets which are very one-sided and unfair, have been paid a pittance for their hard work, have been squeezed out of their companies, and have even had their ideas stolen.
A Few Bad Apples…
A few bad apples amongst funders can damage the reputation of all investors – and this is uncannily similar to the medical profession, where the high-handed bad behaviour of a few doctors has caused patients to treat all doctors with suspicion. There is very little regulation in both systems which means that, just like bad doctors can get away with providing poor quality care, bad investors can also get away with ill-treating founders. These investors take undue advantage of the first-time founder’s immaturity with impunity and end up harming all the players in this fragile ecosystem which needs mutual trust and respect to thrive.
The cheated founders then start bad-mouthing the funders privately and the mistrust spreads. All investors get tarred with the same brush, and this harms the good ones as well. The only way to fight this is by encouraging openness and transparency. This will help to create a level playing field so that funders cannot take advantage of the ignorance of entrepreneurs.
The God Complex
Part of the problem is that investors forget that they are in the business of providing a service to entrepreneurs. We see exactly the same issue in the medical profession as well, where the sense of power sometimes goes to the doctor’s head, and he then starts treating patients badly, because they are vulnerable and clueless.
Doctors need to be reminded that patients are the only reason doctors exist, and doctors need to learn to put their patients first. This is equally true of investors as well. The only reason we are around is because entrepreneurs have the courage and guts to start a company. Our job is to support and service them, which is why we need to learn to put founders first. We need to respect them, so we can help them to grow. Wise funders who do this will do much better than the rest, and this will give them a competitive edge.
I have been trying to bridge the gap between patients and doctors for many years because it pains me to see how the increasing distrust between them is poisoning the doctor-patient relationship, which lies at the heart of good medical care. This is why I have authored many books such as Information Therapy – Putting Patients First; Patient Advocacy – Giving Voice to Patients; and Patient Safety – Protect yourself from Medical Errors – all of which are available online at the www.thebestmedicalcare.com.
I am very worried that the same distrust will wreck the startup space, as well, if we allow crooked funders and founders to get away with bad behaviour. I am trying to inject more trust into the system, by helping investors to see the entrepreneur’s perspective; and vice versa. I am hoping that my posts will help to bridge the funder-founder gap so that first-time entrepreneurs and investors don’t burn their fingers!
[This post by Dr. Aniruddha Malpani first appeared on LinkedIn and has been reproduced with permission.]