What Turns Investors Off Part II - Ruling from Beyond The Grave

Now that I got Part I out regarding what turns investors off, I wanted to get into Part Ii of what Turns Investors Off - Ruling From Beyond The Grave.

I listen to a lot of financial talks and one of my favorite listens is Warren Buffett.  He talks about he has very little instructions for his children, the executors of his will.  He has a saying that I love that basically says, “ruling from beyond the grave has a poor record.”  I translate that into startups as pre and post first investments from outside professional investors.

I’ve seen things that turn investors off.  One of them is what I call “Ruling From Beyond The Grave.”  I see start founders thinking it is their company.  If you don’t have investors, I can see that.  That does seem to imply that you are the one making the magic happen and doesn’t value the rest of your team.  Unless you are by yourself, a solo founder, it isn’t your company, but that is semantics.  I once had a minority founder call a startup that he was doing very little on “his startup,” but you really have to let those go in the moment.  

What really matters is when you talk to investors.  When you go to investors, you should not think of yourself as it being your company.  It isn’t your company.  It will be our company.  That includes the management team, the board, the employees, and the customers.  When you think of the company as your company, it looks like you are only thinking of things along the line of you and what is best for you.  When your decisions are centered about you, this is a big red flag.

How do investors know you want to rule from beyond the grave?  There are a few signs I’ve seen.  One is the term “my company.”  “I’ll be glad to turn over the reigns to a seasoned ceo if that ceo is right for my company.”  No, no, and no.

A second issue where this comes up is in a fixation on control and 51%.  Investors aren’t about kicked entrepreneurs out.  However, this thinking and fear of being kicked out keeps them very concerned and will drive mistakes based on the wrong thought basis.  Once again, even at 51%, it is not your company.  It is “our company.”  Once you take any outside money or distribute the first stock, you have a fiduciary duty to those other share holders.  Decisions must be made with an eye towards what is right for all shareholders, not just the shares that a founder owns.