Ask an Investor: How do I repair a frayed relationship with my lead investor?


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Accepting a venture capital investment shares many similarities to getting married; they are long-term relationships that are not easy to get out of. In fact, it’s likely easier to get divorced than it is to remove an investor from a cap table. Like all relationships, there will be high and low points. Working on the relationships with your investors will be an ongoing exercise for you as CEO. Working on investor relations is especially important when your relationship is frayed.

Stepping back, it’s important to understand why investor relations is a critical function in any organization. Investors bring more than capital; they bring their network, experience, and expertise as well. In a strained relationship, investors are unlikely to bring to the table their full non-capital contributions. Investors are also an extension of your brand. Most venture capitalists are public with their portfolio makeup. If a relationship is soured, they won’t be going out of their way to promote your company within their network. Instead, they will be promoting those companies in their portfolio which they are on the best terms with.

Good communication starts with regular feedback. Large or small company, the management team has a responsibility to let investors know how the business is performing.

As well, investors’ perceptions are formed over time both by how well a company performs as well as how it communicates. In the public markets, Investor Relations (IR) departments work very hard to ensure that their communication is considered best in class because this accolade has a positive impact on a company’s access and cost of capital. Likewise, in private markets, your cost of capital will be directly impacted by your investor relations efforts. The more effectively you can communicate with your investors, the lower the cost of your capital will be.

So now onto repairing your relationship with your lead investor.

Step 1: Start

The first step is to get started. It’s easy to sit there fuming over the poor relationship and go on ignoring the problem. Begin with opening communications. Regardless of who you believe is at fault for the poor relationship, the onus is on the CEO to engage the capital provider. Set up a meeting, preferably face to face.

Step 2: Listen

Why have things gone bad? Listen. You may receive a list of grievances or it may be just a small thing that can be easily fixed. You may feel strongly that the investor is at fault for the poor relation. Those don’t matter. What matters is that you don’t go into this first meeting with preconceived notions. Your job in this meeting is to listen and take notes. Commit to a prompt follow-up in that first meeting.

Step 3: Understand

Now is your chance to understand what the primary source of the conflict is. Is it missed performance targets? Is it misaligned expectations? Have you and/or the investor both upheld your side of the (typically) unwritten agreement at the time of financing? There are obviously far too many issues than I can list here. However, almost all investor/investee relationship issues are rooted in the setting and meeting of expectations. Do your best to follow the threads to their root cause.

Step 4: Expectations

Communication means sharing information. Be open and transparent with your information. Don’t over or undersell what’s going on. Try to present your communications in as balanced a manner as possible. Ultimately, the goal of these investor connections is developing a shared perspective. This, in turn, leads to an alignment on strategy. An alignment on strategy gets you to a shared set of expectations.

You very likely had an alignment on strategy at the time of your financing (few investments happen without). A significant source of a frayed relationship will not only be missed expectations but more fundamental, a disagreement on strategy. Communication is the bridge to alignment. Shared expectations (and clear KPIs) are the foundation of that bridge.


Step 5: Execute

Obviously, once you’ve set (or reset) expectations, it’s time to deliver. Regular, consistent and honest communication is critical to ensuring a healthy and productive relationship between investor and company. Make sure you’ve made any necessary process changes internally to meet those expectations. No one likes surprises. If you see a potential shock coming up, don’t be afraid to pick up the phone to give your investors a heads up. Almost all investors will react better to the emergence of bad news if they were told ahead of time that there was a possibility of such news. It’s critical that during the months after a repair in a relationship that you don’t fray it again.

Step 6: Follow through

Keep it up! Good communication starts with regular feedback. Large or small company, the management team has a responsibility to let investors know how the business is performing. This is important when things are going well but it is significantly more important when the company is overcoming challenges. A steady cadence of meeting or exceeding expectations as a CEO and organization is what brings trust in the team. Trust that will convert into a lower cost of capital and higher valuations at your next financing.

Other Investors

This advice is on rebuilding the communication channels with your lead investor. However, the communications you have with your other investors in just as important.

I recommend you send out a quarterly communication that includes an honest and complete picture of the business. Report on your performance relative to your target. This is particularly important in terms of allowing your investor to judge how well you execute your business plan. Give a clear picture of your financials. Update your presentation deck and include it with your quarterly update. Set up a conference call twice per year and invite your investors to dial in.

If you have done all of this and still have issues with unhappy investors, I recommend reaching out and speaking with this investor directly, as you would a lead investor above. It could be that despite your best efforts to offer a complete picture of the business, the investor is not getting the info that he or she requires — going out of your way to truly listen is a giant step towards addressing the frustration of any investor.

Sarah’s take

Sarah Marion

One of the most common fractures in an investor/investee relationship is the approach to sharing bad news and having hard conversations. Human nature lends itself to conflict avoidance, and as a whole, we err towards suppressing our feelings rather than surfacing challenging topics. There’s a wide range of comfort for these “tough talks” at an individual level, but it also maps to career – mostly due to the amount of practice that different roles have in these challenging conversations.

As a broad generalization, investors skew more comfortable with hard conversations than founders do. Founders are constantly in sales mode, trying to convince the world, their customers and potential recruits that their vision of the world is the right one. This can translate to the board meeting, where founders present a rosy picture of the world rather than focus on the tough and persistent challenges facing the business. Investors on the other hand have a lot of practice sharing bad news – we tell countless founders on a constant basis that we don’t have enough conviction in their business to invest. This never becomes an investor’s favourite part of their job, but it does become a practiced part.

Relationships are built on trust and communication, and made stronger by the hard conversations. Lean into the conflict and talk about what’s going wrong earlier rather than later – your investor relations will be much better for it.

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Photo via Unsplash


Christian Lassonde

Christian Lassonde is the founder and managing partner of Impression Ventures, a venture capital firm focused on investing and leading deals in FinTech companies raising late seed to early Series A rounds. Her is a former founder, having built and sold Virtual Greats, a luxury online IP rights broker, and Millions of Us, a digital agency. Christian spent a decade in San Francisco building software for Second Life, LucasArts and Electronic Arts and selling solutions to Sony, Nike, Warner Brothers, General Motors, Coke, Intel and many more Fortune 500 companies. You can follow Christian on Twitter at @classonde

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