3 Things to Create a Great Founder/Investor Relationship

As I look back on the last decade, overwhelmingly my professional highlight has been getting to do hands-on work with early stage startups; specifically, the relationships I’ve been fortunate to build with founders we’ve invested in. Gaining conviction and committing to a team and business early in their life cycle and being there through the peaks, valleys, and everything in between. It is an absolute honor and joy to get to do this work.

At Bread & Butter Ventures, we’ve invested in 60+ companies to date. The most important criteria in our investment decision is team. We invest in the founding teams and get so excited to join the team; we immediately begin building the foundation for a strong and fruitful working relationship. This relationship building between founders and investors starts well before any check is actually written. It’s a major part of investment decisions, and in fact we always ask ourselves, “are we uniquely equipped to add value beyond our capital?” — and we will pass on a great opportunity if that answer isn’t a resounding yes. Adding value to an investment also requires a great founder/investor relationship. It’s important to build strong relationships with all of the founders I work with and I’ve learned a lot about what goes into making those relationships especially strong. Sharing here 3 key learnings around what I believe makes a great founder/investor relationship.

1 — Develop absolute transparency and trust. This cornerstone is foundational to building a great relationship with both founders and investors. Founders should only take capital from someone you trust and really want on your team. It’s important to be upfront and honest with one another prior to an investment closing to ensure interests are aligned. What type of business am I aiming to build? How long do I envision building this for? What would an ideal outcome look like? How does this change the world? What help can I expect/provide after investment?

2 — Maintain consistent communication. This is probably the #1 most consistent trait I’ve seen in exceptional founders and it’s truly at the heart of building great relationships between founder and investor. These founders are exceptional and consistent communicators in both the best of times and in the hardest of times. When founders go silent, we assume it’s a bad sign, and frankly, it starts to erode the relationship. If we only hear from founders when they need more capital, it’s less likely to result in a yes. There is no metric too bad or update too scary if we’re in lock step together and focused on navigating through challenges. Some easy ways to streamline consistent communication:

• Send a monthly written investor update (suggested template here) that tracks the same KPIs and core metrics monthly.
• Keep an ongoing founder/investor monthly 1:1
• Decide on the best off-cycle communication for you together. We are available via phone, text, Voxer, Whatsapp, you name it — as needs arise. We especially love sending quick audio messages back and forth on Voxer as it eliminates the need to wait to schedule a meeting and allows us to do quick iteration and co-work together.
• This consistent communication builds trust and vested interest. As investors, our goal is to be on speed dial if you need help, and we will always respond asap with a bias toward listening and execution.

3 — Find an investor who works for you — know their superpower and leverage it. There are many ways to find capital, even in a constrained market like the current one. The old adage “it’s hard to fire an investor” is true! Always make sure your investors are aligned with your core values and they are someone you want to partner with for the next 7–10 years. When we commit to invest, we’re signing up to roll up our sleeves. Get to know your investor team and how to leverage them. For example, as you get to know me during the diligence process you’ll learn about my background at Google and leading 100+ product partnerships. And you’ll learn that I love Business Development! Few things excite me more than getting back into the BD seat and helping our teams with customer intros and go-to-market support. Know your investors’ strengths and leverage them with as specific asks as possible. For example, send a dream customer pipeline list vs. asking broadly for intros. Send a shared google sheet with a target investor list so we can collaborate in real time on introductions and suggested firms to add. One of the memes in venture is the investor saying “let me know how I can be helpful” — but in all honesty, do, truly, let them know.

How to operationalize some of this? I recommend keeping a running 1:1 agenda doc for our founder/investor meetings where we keep notes, and I ask founders to update the following outline prior to our meeting:

• How are you? (Green, yellow, red); green = present, good energy; yellow = somewhat distracted, tired; red = here but not here, very distracted
• Key wins/progress since our last sync
• Biggest friction or blocker right now
• Key priorities/OKRs for this month
• Check in on Key Work Streams
• Asks/Help needed
• This allows us to streamline, stay focused, and continue to prioritize and reprioritize together in real time.

The founder/investor relationship is a unique and meaningful one. I’m a true believer that as an investor, we work for you and alongside you and we are a member of your team. I respect that it’s your vision we’re investing in and our job is to help open new lanes of opportunity, help bring data points from across the industry and portfolio to inform your decisions, be a sounding board, ask questions to examine all viewpoints, and ultimately — to invest in the future by investing in you. We’d love to hear what you look for and value in these relationships and how to keep improving upon them.