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Episode Date: December 4, 2014
Investors and founders begin their relationship with the best intentions, to build something meaningful in the world. But the road can get rocky, and miscommunications abound. So be straight from the very start. In this "Startup Basics" Jason lays it out: What should investors and founders expect from each other?
- The longer you wait to share bad news (with investors), the worse it is for you. Explain how you are trying to get through and you will be pleased with how well your investors respond. Both founders and investors need to be candid with each other.
- Ask the investor what their expectations are in terms of information type and frequency. Also, ask them how often they will be available to you when you need them. Be as specific as possible.
- Do your research before picking investors. This could be a 10-year relationship.
- Once you pick your investors, be super loyal.
- This has been a moving target over time. There was a time when investors had all the power, and then there came a time when founders started holding the power. This flip-flops back and forth. Today, founders tend to have more power because there is so much money in the world, and there are so many investors competing to get the best deals.
- Depending on who has the power, that's where the bad behavior tends to comes from.
- You don't go into a relationship with an investor, or a founder, imagining the relationship breaking down. You go into it believing it will grow into something meaningful and successful.
- A founder doesn't send monthly reports for a couple of months. They eventually email the investor and tell them that 2 of the 3 founders quit and the company is shutting down. All investors will get 5 cents on the dollar back on their investment. Investors shouldn't have to email their founders to find out they're going out of business. Failing in business happens. Most things in the startup world don't work out. You have to communicate. Founders who do this are placed on a list of un-fundable founders, all because they didn't keep their investors aware of what was going on.
- An investor shares information from one startup that's pitching them to another one that they are invested in.
- An investor says they will invest. A week goes by, and they come back with different terms. They grind the founders down and take control of the company.