Your browser is currently blocking notification.
Please follow this instruction to subscribe:
Notifications are already enabled.

Why Do Entrepreneurs Make Such Poor Use Of Their Investors?

Why Do Entrepreneurs Make Such Poor Use Of Their Investors?

As with lots of things in life, you require a team in order to be able to accomplish something, and this is true for startups as well.

This is why most startups have co-founders who help each other during their journey, which can often be rocky. However, entrepreneurs should also think of their angel investors as being partners in running the startup.

Part of the problem is most founders think of investors as providing dumb money. All they really want is the cash, and then the freedom to use that as they see fit, in order to implement their dreams and crazy ideas. This is why they have a very limited view of the value which a mature angel investor can add to the startup. This is such a shame because every good team needs both a thinker as well as a doer.

The job of the entrepreneur is to do – to execute and implement, by getting their hands dirty. The task of the investor is to be a thinker, because you have a 30,000 foot view and can provide guidance as to what to focus on, so that he does the stuff which is likely to give him the biggest bang for his buck. Working together, you can bridge the thinking-doing cap, which often causes startups to collapse.

A lot of angel investors are experienced and worldly-wise. They have run their own businesses and made money. They have a lifetime of experience to share, and quite a bit of maturity as well because of their age – grey hairs are acquired at a high price! It surprises and disappointed me when entrepreneurs don’t take advantage of this.

When startups are stuck, logically, the first people they should reach out to is their angel investors – after all, that’s the job description of an angel investor. He didn’t just hand over a cheque with the expectation that you would multiply his money after five years. If that’s what he wanted, then he would be much better off putting it is a fixed deposit, where’s it far more secure.

Now you don’t need to talk to all of them – just the few whom you have established a rapport with. (And if you haven’t been able to do so, shame on you – this is a key task of a good entrepreneur!) The problem is that this requires humility and integrity. You need a lot of self-confidence to reach out for help because you are signalling that you are out of your depth, and you are worried that your investor may interpret this as a sign of incompetence.

Please remember that your investors don’t think you are Superman! Yes, they have taken a bet on you, but they also understand that you are raw and inexperienced, and will need some hand-holding and guidance during your journey.

They will often be able to provide you with extremely high-quality advice, because of their experience with watching how other startups have evolved. They have a network and can help you tap into it, to make your path easier. Remember that they have skin in the game, and are invested in making sure that you succeed. They will not think any less of you just because you are stuck – and in fact will admire your courage in asking for assistance.

This is why it’s part of your job to frequently send them updates, and keep them in the loop. You should do this for selfish reasons, as it’ll increase your chances of success. If you had to pay a similarly qualified consultant for advice, you would have to pay an arm and a leg- and your angels are happy to give this to you at no charge. I think this is perhaps part of the problem – because it’s free, it’s not valued as much!

That’s why it’s important to respect your investors and share information with them proactively on a regular basis. Reaching out and asking for help is good for you, because they may be able to provide invaluable insights – often in a short phone conversation.

You do need to learn to respect their time and you should craft your problem and the possible solutions you are exploring succinctly and in writing so that they can add value. Yes, they are busy, but if you help them to feel involved and engaged in your startup, they are much more likely to help when you find yourself in a spot.

Remember that they have a soft corner for you, which is why they invested in you – be smart and make the most of this.

No investor likes to think of himself as being just a source of dumb money (though I agree that many of us are often quite clueless). If you are respectful and show that you want to tap into their knowledge, they will be happy to help. Most angels think they are smart, and we want founders to make use of our wisdom – after all, this is why we became angel investors in the first place!
And, yes, it’s true that some investors can be a pain in the neck. They may end up eating into your time and giving you all kinds of silly suggestions, but it’s a good idea to assume positive intent, and then calibrate the interactions you have with each of them depending on the value which they add to your life.

Be smart, and make clever use of them!

[This post by Dr. Aniruddha Malpani first appeared on LinkedIn and has been reproduced with permission.]

Get Weekly Briefing On The Indian Startup Ecosystem!

Note: The views and opinions expressed are solely those of the author and does not necessarily reflect the views held by Inc42, its creators or employees. Inc42 is not responsible for the accuracy of any of the information supplied by guest bloggers.


Aniruddha is Director at Solidarity Investment Advisors
Loading Next…

Upcoming Events