I enjoy being an angel investor because it gives me a chance to interact with founders. Entrepreneurs can be exceptionally clever people who are very motivated, optimistic, and determined. However, just like I have learned a lot of good things from my smarter entrepreneurs, I learn a lot of things from my not so good entrepreneurs as well – a list of what not to do !
It is not always to keep an investor happy, because an investor looks for results, and how your company performs is not always in your control. However, even if you are not able to meet your targets, as long as both you and your investor have realistic expectations, and he can see you are putting in your best efforts to fix the problems you run into , there’s really not much cause for unhappiness.
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However, it’s remarkably easy to make your investor unhappy, and this is something I find some entrepreneurs do on a pretty regular basis. When founders find they cannot meet the targets which they set out to reach when pitching to the investor, they feel guilty, embarrassed, and ashamed that they made promises which they cannot fulfill. Their first response is to go into hiding, which means they just stop communicating with the funders. This is a big mistake!
While most funders are mature enough to understand that life is full of uncertainty, and that an entrepreneur cannot always deliver for various reasons, they at least want to know what is happening. Show him what you are doing; be open about your mistakes; and share what you are doing to try to correct the problem.
The worst mistake a founder can do is to lapse into radio silence. It is especially when things are not going well that you need to communicate the most, because this is when you actually need the most help. If you lose good will by not communicating with them when you’re running into problems, then they will lose trust and faith in you. Then when you run out of money and need their help, they will no longer be willing to provide it. It’s better to accept short term pain and be open when things aren’t going well, rather than go into hiding. This just infuriates the investor even more, and ruins your reputation.