Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world’s most promising young entrepreneurs. In partnership with Citi, YEC recently launched BusinessCollective, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses.
What is one pro (or con) of having a more involved relationship with your investor where you actively seek or get advice?
1. You Get Brutal Honesty
While this can be a pro or con, a person who knows you better will tend to be more brutally honest about how they see things. The advice will hit at a much more personal level for this reason. While it may not always be something you want to hear, it is most likely something you need to hear. The tough love of a closer relationship with an investor can be what helps create change.
2. They Have Seen It Before
Great investors are happy to share advice from other portfolio companies. We’re fortunate to have a great relationship with our lead investors and provide insights from experiencing many of the issues we face. From high-level strategy to tactics, we can leverage to push forward as fast as possible.
3. They Want to Run Your Business
Investor advice is almost always welcome; so long as there’s a boundary between what is acceptable and what is not. It is important that an investor offers you advice in his or her area of expertise, but sometimes an investor can mistakenly feel that they know how to run your business, offering insight where it’s not needed, which could be detrimental to your operations.
4. They Can Help You Network
Involved investors are probably the kind who have been working in your industry for a while. Their experience may have involved working with some of the biggest leaders in your field, and it’s possible that they’re willing to help put you in touch with them. The most experienced investors are often networking goldmines, and if you don’t know who you need to talk to, they likely do.
5. You Can Overshare
Although its great to have a close relationship with your investor, you want to try and be sure not to overshare too much while seeking advice and being open with this individual. This doesn’t mean you need to hide things from them, but you shouldn’t be stressing your investors out with every little detail and up and down within your business. Keep conversation focused on your relationship.
6. They Support You During Tough Times
We keep our investors updated in both the good and the not-so-good times. And while I was anxious to report bad news at first, I’ve learned that our investors are truly supportive. So don’t be shy to reach out to them in tough times. They may prove to be the help you need.
7. You Might Take the Wrong Advice
Some advice you pay for, and some advice you’re paid to take. Taking good advice from an investor may make the next round easier to raise. But take the wrong advice and the next round may not happen. There’s a reason you have (or should!) set aside equity for advisors and board members. Surround yourself with smart guidance, not just rich advice.
8. They May Know Too Much
Sometimes it may be best that they don’t know everything. For example, if they get a sense that you aren’t getting along with your co-founders that may scare them from investing in the next round, especially if that said co-founder was a major reason for investing in the company. In a case like this, if they already know the issue, be transparent and ask for advice on what you’re struggling with.
9. They Can Provide an Outside Perspective
We tend to be blind to ourselves. Nobody ever thinks they have an ugly baby. More than just an investor, any outside perspective helps, and getting feedback on how you’re doing from more angles is always a good thing.
10. They Think About You in Their Off-Hours
Getting investor feedback is usually a great thing. However, the more powerful thing about a close relationship with an investor is that they are more actively thinking about you in their off-hours. For us, the investors we talk to most are constantly bringing leads, making introductions, and helping move the mission forward. They’re subconsciously working on the project at all times.
11. They Help You Stay Focused
I want investors to know that I do not operate in a vacuum and that seeking advice is part of my job. However, I tend to stay more focused dealing with investor input. I know what I want, get my questions answered, and then go back to work.
12. They Feel More Ownership Over the Investment
One good reason to involve your investor by seeking advice is that they feel more ownership over their investment. This is one of the top two most important concepts for any investor. If they feel more involved, they will be more at ease and will trust you to make the right decisions. They will also be more likely to help you lead on your next round if they have a personal stake in the company.
13. They Don’t Have All the Context
An investor, as close as they may be, is still someone who has their livelihood to protect. You need to be very, very careful about venting about things that they may not be able to put in the proper context. You could accidentally leave them feeling threatened or conflicted about their investment even if there isn’t a real danger.
14. They Share More of the Experience
Chances are your investor has experience in many aspects of building a successful business. Therefore, it makes sense to keep your investor as close as possible at all times, and actively seek advice when his or her experience can help you make the best decision. Building a business should not be a test. You should do everything within your power to succeed, and one way is to keep investors close.