Why Open Communication Is Key to a Successful Founder-Investor Relationship – Marketplace Experts
We currently find ourselves in an uncertain market where a large number of companies are looking to raise capital as they seek to survive in the current environment.
Although there are capitals on the sidelines, they are more selective about the opportunities they pursue. While some groups are in the business of allocating capital, others are focused on adding value to the companies they invest in, not only providing capital but taking the time to offer their expertise and finding ways to leverage relationships or other skills that can benefit the business. Meanwhile, founders work hard to make their companies shine and stand out to attract a well-rounded investor base.
Once a company has engaged with strategic investors, what distinguishes those who succeed from those who struggle? What is the best way for a founder to make the most of this opportunity and get the best result?
Contrary to what many young founders may think, the answer is not the tired “fake it ’til you make it!” maxim. As someone with decades of experience in private equity and venture capital investing, the number one piece of advice I would give to all businesses is to have open, honest, two-way communication with investors. .
It can seem especially difficult when a business encounters obstacles. Especially in today’s market, founders face a variety of different challenges, and a natural response is to try to sugarcoat or hide these issues while a company works to overcome them. In short, many founders mistakenly view admitting problems as a sign of weakness.
The reality is that investors not only know there will be challenges for any growing business, they fully expect them. Often things don’t go as planned, and acknowledging challenges and being willing to discuss them is a clear sign of strength in a leader.
In fact, since hills and valleys are an integral part of growing any business, it can be worrying for an investor to hear nothing but good news. Investor-founder relationships thrive on candor and transparency – open discussions about how a company approaches challenges and is receptive to advice and guidance.
This last part is essential. Along with falling into the trap of thinking that all news has to be good news, another trap founders fall into is believing they always have to be the smartest person in the room. Investors love innovative, forward-thinking founders who seek creative ways to solve problems, but we also love working with leaders who are eager to tap into the experience and perspective we have to offer.
In my role, we look for companies that are actively working to solve problems. Once we identify the right company, we never expect them to go it alone. Our goal is to work with them to identify the challenges that prevent them from moving to the next level.
The purpose of establishing these issues is not to pass judgment on them; it’s about having open discussions and offering expertise to circumvent or overcome them. As an investor, we are always fully aligned with the founder with the aim of achieving the best possible result.
We have a virtual treasure trove of resources – leaders with expertise in relevant areas, experience supporting founders who have faced similar challenges, and relationships we can draw on to find solutions. In fact, founders should insist on working with investors who have more than money to offer; equally valuable is the use of the unique skills and networks an investor brings to the table.
This is a very good time to be a founder. Once you’ve found the right investor, work hard to build a solid relationship with them. By working together in an open, honest, and receptive way to new ideas, you can celebrate shared success.
Steve Lebowitz is Senior Managing Director at Two Bridge Capital. With over 20 years of experience in real estate and senior housing investing, Lebowitz has been involved in over $1 billion in acquisitions, complex project financings (traditional and HUD) and management of assets.
The opinions expressed in McKnight Long Term Care News guest submissions are those of the author and not necessarily those of McKnight Long Term Care News or its editors.