The Theranos scandal demonstrates how quickly investors will fall over themselves to seize a golden egg deal. When investors pay so much attention to only the (supposed) big tickets, they leave smaller companies in their portfolios behind.
The investment space is in the midst of a mental health crisis and skyrocketing burnout rates. Founders of companies of all sizes and returns need dedicated support, and an unhealthy business relationship can have a heavy toll on your mental health. Ultimately, every founder needs to know their investors are playing with them.
Drawing from my time as a professional NBA player and as a seasoned investor, here are a few warning signs that a VC may be leaving you on the sidelines:
Your check-ins are a recurring calendar event
Most VCs have packed agendas, and they have an unspoken practice of allotting founders a weekly or monthly time slot to touch base. Not only is this too little time to really catch up with founders and also hear about their life outside of work (which ultimately impacts their work), it sets the precedent that communication has to be regimented.
Founders and investors should want to spend time with each other outside of the boardroom and Zoom calls. When there is genuine trust, discussions about hobbies, family, and vacations will arise naturally and break down the formal barriers that stop investors and founders from talking about their well-being. These subjects won’t come up organically if founders are only given an appointment-like meeting with investors.
The right investor won’t close a deal and then take themselves out of the equation.
That’s not to say that investors shouldn’t have scheduled meetings with founders. Rather, investors should make it clear founders have the freedom to call them when they need to — whether for business guidance or personal support, there has to be an open line of communication. Of course, investors can set boundaries and say they’re not available after certain hours or on specific days.
At 22 Ventures, we try to speak with founders we’re pursuing at least weekly, and we mix up how we interact with them. We play golf, talk at a coffee shop or go for dinner — we show founders that they’re not a meeting reminder on our calendars. One founder we work with even asked us how much time our team spends together in general, which is a great question for assessing if a firm is role-modeling what a team should look like for its founders.
Interactions are transactional
When there’s money involved, it’s easy for founder-investor relationships to become purely transactional. Investors tend to put up the money and expect results. But businesses aren’t linear, and such a mindset puts a lot of pressure on founders to perform without a helping hand.
The right investor won’t close a deal and then take themselves out of the equation. They’ll roll up their sleeves and be at a founder’s side as they work toward goals. What’s more, they’ll say outright if an idea or methodology is wrong, because they’ll prioritize their relationship with the person, not the project. In the past, founders have pivoted entire business ideas based on my advice because they knew that they could trust me and that I want the best for them, as opposed to letting them sweat for a deliverable they won’t meet.
Investors should actively ensure interactions aren’t transactional. Create meetups where neither investor nor founder has to perform for the other, are on neutral ground and can show their true colors. Personally, I use these moments to share my failures with founders, to put them at ease by saying “me too” when they mention the challenges they face, the anxiety they feel. By empathizing like this, founders are reassured that they’re working with, not for, their investors.
They don’t stay in touch if you don’t work together
Fundraising is personal in the sense that investors are literally investing in a person, but that doesn’t mean that getting a “no” from an investor is a commentary on the founder. A worthwhile investor will continue to stay in contact with founders they believe in and who fit their firm’s culture, as they should have a sincere desire for them to succeed, keeping the door open for potential partnerships.
Investors should continue to contact and meet founders who haven’t joined their team. Founders I didn’t bring on board years ago still call me to share that they’re having a baby, getting married, or asking for guidance about their next company. They do so because I took the time after our initial meeting to stay informed about their well-being.
Staying in touch creates a network for founders that provides them access to mentors and experts already operating in their industry, and can give them a leg up. And because entrepreneurship tends to be serial, it leaves the door open for investors to work with the same founder on future opportunities.
Back in 2017, Goodwater Capital was one of the first investment firms to take a more holistic approach to founders, having direct conversations about their personal lives and setting “family time” hours where emails couldn’t be sent. Yet five years later, founders face more pressure and need more progressive support measures.
Founders need to see their investors demonstrating real concern for their well-being — and it has to be visible in their check-in structure, communication and post-pitch behavior. If it isn’t, that should be cause enough for founders to back away.