Equilibrium and Harmony – Words Seldom Heard in Startup Boardrooms
Equilibrium and Harmony. These two words should accurately describe the core objectives driving relationships between entrepreneurs and their investors. Sadly, they remain elusive goals for many companies, especially for early-stage startups. Instead, the dynamics between investors and entrepreneurs are often defined by conflicts of interest, disrespect, lack of communication, mistrust, and misalignment. And the playing field for this drama is usually in the boardroom.
To be clear, entrepreneurs and investors both bear responsibility for this dysfunction. This is because, during the delicate dance of negotiations prior to completing an initial investment, neither party properly manages the other’s expectations. Promoting an atmosphere of partnership is ignored when it should be a precondition for what is anticipated to be a multi-year marriage.
The recipe for success must involve honest communication, particularly with respect to the future career path of founders. Why do two-thirds of founding CEO’s get replaced by VC’s? Because the skill sets of founders usually do not evolve sufficiently quickly (and sometimes not at all) to keep pace with the with the success of the company. That’s not a bad thing, it’s a natural thing. Not anticipating it, especially when this is such a well-trodden path for experienced VC’s, is bad.