Sometimes startup leaders, especially first-time CEOs, make the mistake of thinking that their investors are their boss(es), available to help them solve their startup’s problems. While experienced investors may offer some excellent value-add as they bring their distinctive point-of-view to the table, they should not be treated like a boss.
An investor is not a boss because an investor typically provides financial resources to a business in exchange for an ownership stake or a return on their investment. While an investor may have a say in some strategic decisions made by a company, they are not involved in the day-to-day management of the business, and they do not have the same level of authority over employees as a boss would.
In contrast, a boss has direct control and authority over employees and a company’s operations. They make decisions about the direction of the business, set goals and objectives, and manage employees to achieve those goals. A boss is empowered to direct their team’s priorities, thinking, planning, and behavior to accomplish their organizational goals.
In a startup situation, confusion can emerge because many startup leaders have significant previous experience working in larger organizations for a boss. They have often learned that a good boss can be a tremendous asset by providing help and support through needed resources and tools; clear goals, objectives, and progress feedback; problem-solving and barrier-busting support; and leadership and motivation. Faced with the tremendous uncertainty and steep learning curve of startup leadership, it is natural to cast about looking for similar help from somewhere. And a startup CEO reports to the Board of Directors, right? A Board of Directors is often heavily populated by investors who have sold you on the idea that they will provide more than just a monetary investment and promised to contribute their expertise, connections, and other non-monetary value-adds. However, while a startup CEO does report to the Board of Directors, the investors who are Board members are not the equivalent of a boss. Here are some of the differences and reasons why you should not treat your investor like a boss:
- An investor/Board member is part of the Board of Directors, which has a fiduciary duty to represent the corporation’s shareholders and make decisions in the company’s best interests. A boss, on the other hand, is involved in managing the day-to-day operations and employees of the business. It is a difference between corporate governance and operational management.
- Investors have different priorities and goals because they are focused on getting a return on their investment and, therefore, are often more focused on the company’s long-term financial performance and funding. Bosses are focused on meeting performance goals and achieving the business plan. While strong execution certainly contributes to building the startup’s value over time, the focus and priorities are often different at any given time.
- A boss expects to collaborate with and actively guide their team leaders in solving business problems. In contrast, an investor/Board member expects the CEO and management team to take the lead on solving the problems and figuring out the strategy. Board members ask questions and provide advice, but the operational team builds the business.
- At best, your investors are thinking about your business part-time. You and your team, however, are 100% focused on the particulars of building your business, grappling with resolving the inherent conflicting goals and paths.
- A sign that an investor is trying to act like a boss is excessively frequent communications, which tend to result in too much discussion of operational details. A VC board member who tries to be “helpful” by having a 1-1 call every other week with the CEO is acting like a boss and generating lots of extraneous work. The same dynamic can begin when an early stage Board wants to meet every month and digs into too much detail, driving the team to spend too much time preparing for and processing Board input rather than building the business.
Remember that you and your co-founders/team are the ones who are fully dedicated to building your startup. Your investors want you to succeed. Indeed, they are some of your greatest cheerleaders, but it is the team that is going to make it happen. Do not look for someone else to tell you what to do. Getting advice from experienced people who can offer great connections and perspectives is okay. Still, you should not just do what they tell you because you are the only one immersed in the nuance of your startup’s challenges. You need to adapt any ideas that are shared with you to fit. Do not give your investors operational power over you by looking to them as your boss – it isn’t fair to you or them.
