Despite the horror story contentious relationships we have been told, the truth is venture capitalists want most of the same things the business owners want. They want the company to grow. They want more customers, better deals from suppliers, and strategic relationships that will take the company to the next level. Oftentimes, this means restructuring the way the company does business, which is where the tough decisions get made. If you've ever watched Chef Gordon Ramsey's Kitchen Nightmares or Robert Irvine's Restaurant: Impossible, you've seen the kind of resistance many business owners have to change. Good venture capitalists act like business consultants in many ways. Inept managers and employees are identified and replaced. Bad lines of business are jettisoned or are provided assets to become better. In most cases, this is good for the company. Most owners know that, but have personal reasons for doing things their own way. Helping out one's sister with her lazy son's first job. Keeping a product that dad created even though nobody orders it and it takes up space. Dealing with the same overpriced vendor because she goes to the same church. Most business owners know when they are making poor decisions. A new investor is the perfect excuse for transitioning out of bad business relationships!
To work with an investor, you must consider this a marriage of sorts. Professional investors don't go away because you're having a bad day or bad month. Their fiduciary responsibility to their partners means they will be there day and night, month after month. Silicon Valley entrepreneurs know this and use it to their advantage. They seek venture capitalists with business relationships, not just money, that they can use. If you change your mindset, you will see that this can be a huge advantage when you're having a bad day or bad month. When you change your mindset, you'll see that giving up equity for capital and relationships can be a game changer for your company.
We'll talk more about the relationship with investors, as well as negotiating the contractual relationship in upcoming articles. Feel free to email us or post your questions or comments in the blog.