Degrees of Involvement with Investors

When an investor puts money in your business, how much involvement do you expect him or her to have with you? Venture capitalists and business angels have different expectations on their investments and will devote their time depending on certain conditions and factors associated with the venture which they fund. It is important for you, the entrepreneur to understand how to manage the expectations of the investor.

• How much did the investor put in?: The amount of money is proportional to the amount of time that the investor wants to spend with the company. It depends on the investor’s decision, be it the venture capitalist and business angel. You can expect private investorsto have a tendency to be anxious on how the entrepreneur treats his or her investment. Psychologically speaking, the money your investor put sit, he or she will be in distress and have increased anxiety if you start making losses with the business. Hence, in some sense, the amount of attention is really dependent on how much the investor has spent on you.
• Do you need any form of assistance?: Does the entrepreneur have a strong team behind him or her? For example, it is unlikely that most startups have a legal or financial advisor at the start. The investor should have some experience in spotting weaknesses in the startup. Apparently, legal resources are usually the most needed by technology startups.
• How willing are you to accept help and advice?: If the entrepreneur and his team keeps resisting the investor’s advice, it is pointless for the investor to stop wasting time to help. However, this sets up potential conflicts between the investors and the management team. Entrepreneurs usually need advice for major decisions but not on operational decisions that happen day to day.
• Experience required for problems: If the investor has no experience with the problem faced by the management, it is better to take a hands-off approach and try to get help from people who has the necessary expertise in the area.
• Lead Investor: In some cases, a consortium is formed among a group of investors, with one of them leading the pack. The lead investor will be the point of contact designated to keep the rest of them informed about the management’s operations and movement with the business.