No. 2 – What’s the role of an investor anyway?

I want the credit if I’m losin’ or I’m winnin’.

– Kendrick Lamar

You will likely need to raise money to build your startup. And it’s crucial to understand the role investors play once that happens. It’s tempting to think that your investors will magically transform your business into a success. Nothing is further from the truth. 

The basis of your relationship is cash. Investors have it, and you need it. They expect a hefty return in exchange. When they finance your startup, they believe in your idea, your team, and your opportunity to be successful. Any help they give you beyond that is supplemental.

Some investors are happy to offer more. They might introduce you to the right people, help you find talent, or even share advice. What they can’t do is make your startup a success – that is your job.

Given their proximity to startups, one can be forgiven for believing that investors know something the rest of us do not. If there was a secret, no startup would fail and investors would never lose money. But both happen. 

Instead, investors can offer valuable insights. Keep in mind, advice that works for one founder might not work for you. The real value is having someone who can ask the right questions and help you recognize what you’re too close to see.

Some founders become so concerned with keeping their investors happy that they forget to build a great business. The less assured believe the way to win is to keep the person writing the checks happy. As it happens, you only need to make good on your promise. And the best way to do that is to build something people actually want.

Always be thoroughly transparent with your investors. It’s unlikely you will present them with anything they have not seen before. They know startups are hard and most fail. You can recover from many things, but never from spinning the story to keep them happy. They’ll catch on eventually.

It might be tempting to think you can outsource your decision-making to an investor to absolve yourself of responsibility. But as a founder, it doesn’t work that way. Everything begins and ends with you, and nothing gets done until you make it happen. Suppose you do everything an investor says and your startup still fails, do you really think you will get off scot-free?

Ultimately, the role of an investor depends on who you partner with. Some may give you cash and that’s it. Others will help, but only if you ask them. Regardless, nothing is as important as just doing the work. 

No investor can make or break your startup, it’s all up to you.