Entrepreneurs: This Is Why You‘ll Raise More Money If You Trust Your Team
Founders often start off on their own with nothing but a bold idea and the guts to see what happens next.
They bootstrap and scrap their way forward. Then, they have a few wins. Either make or raise a little money. And get excited to hire a team and take a few things off of their plates.
Often a team is a few people at first. Someone with expertise in the product. A great operator. Someone with financial expertise, or marketing.
But the Founder is used to doing things in his or her own way. Nobody loves his or her company the way a founder does. And new team members have different ideas about how to execute, or even where the company should go next.
Now, a Founder is managing people on top of trying to move the company forward. And that can be hard, and frustrating. So sometimes a Founder will revert to how the company started — s/he will do everything. In the heat of the moment, it can seem easier. But in reality, it can keep you from raising much needed funds. If you don’t trust your team to do their job, here are some of the things that can happen.
Lack of trust causes “timeline creep”
As a consultant, I am often brought in to help with fundraising or a strategic partnership (or both). People hire me because I have raised millions of dollars and sat in thousands of investor meetings. And I have been on both sides of the table.
But often, Founders are very nervous when I first reshape their investor presentation.
A Founder understands his business better than everyone else. But I was hired for my specific expertise. Going back and forth about every detail only wastes time. And even worse, it detracts from the day-to-day operations of the business.
Some Founders I have worked with were so nervous about changes to an investor presentation that corporate decisions were put off for weeks. The reason? The Founder spent days haggling over whether a pitch deck could be 45 slides for a 20 minute slot. And there was a domino effect after that. We would end up repeatedly updating the timelines we told investors.
Investors can see if unrealistic timelines are laid out, or if realistic ones are not met. Execution is a critical component of a functioning company. If you are not meeting timelines that you lay out to investors, you are not executing. And if you are not executing, investors don’t want to invest.
A disempowered team will not problem solve when you hit a bump in the road
Part of raising money is telling investors what to expect from your company, as well as when to expect it. In January 2019, we will have positive clinical data on a product, for example.
I mentioned timeline creep above — when the data outcome is pushed to February, March, or beyond. But the other possibility is that, when you get the data, its not positive. Or, not positive in the way you expected. But it takes time to work through the best takeaways from surprising results, and how to move forward.
Without trust, your team won’t feel empowered to make decisions or out-of-the-box suggestions. They won’t work to figure out the solutions to the inevitable bumps in the road. They will sit passively and await your decision.
Meanwhile, your potential investors will be waiting for the data you said you’d provide. What are you going to tell them?
Once again, it means that time is wasted, and the most creative problem solving is likely not going to take place. You’ve missed an opportunity to get valuable input from your team.
If you don’t trust your team, investors won’t trust you
When I was on Wall Street, I would see it all the time. A company would come in to meet with me. The CEO would give the entire pitch. Including the background science, even if the Chief Scientific Officer was sitting in the room. I would direct a question toward the CSO. The CSO would open their mouth, or speak a few words, and the CEO would cut him off and answer my question.
Walking out of that room, I thought there were two possibilities. Either the CSO was inept at his job, or the CEO was bulldozing the rest of senior management. It looked like the CEO did not trust his CSO to say what he thought investors wanted to hear. Neither scenario made me comfortable enough to move forward. Without a credible team, in my mind, a great company idea means little.
Being a good leader means being able to hire well, especially when a team is small. Again, investors are looking for a team that can execute. If that team looks like it is infighting or unstable, investors will move on. There are too many other leaders in the field that are worth the money.