Being a founder is a lonely journey. It matters incredibly who you bring along to support you during the long-haul, from your team, your founder “squad”, to advisors and, of course, your investors. They can all play different roles for you as you traverse your path, but only your investors can have significant formal and informal control over your company along the way.
In general, many VCs are perfectly nice people, but they have a lot of different incentives to juggle. As a board member, they have a fiduciary duty to do what’s best for the company. As a partner in their fund, they will have an incentive to maximize returns for LPs and to impress their other partners. As a person, they could be really in your corner. All of these are dynamics that are largely out of a founder’s control, and by definition, investors will have more experience navigating these incentive conflicts than most founders. On top of all of this, if you layer in some of the ego issues we’ve also clearly observed in the industry, it’s easy to extrapolate how situations can escalate and relations sour over the course many years.
Most first-time founders learn through experience how to navigate these conflicts of incentives and vectors of investor control. Some luck out by working with a group that is aligned enough on values, and the going is smooth enough that they can manage to resolve most conflicts via trust. However, many founders have at least one or two bad stories of individual investors (and often intertwined with contexts) that led to some form of value destruction.
Some VC-founder relationships can also be incredibly productive — I wrote a piece before on how VC investors can actually be helpful and how to more critically evaluate investors during the financing process across these dimensions — continued access to capital, access to knowledge and network, and most importantly, access to the more human side of the VC-founder relationship. As venture capital continues to proliferate, the last dimension seems to be the only basis of long term differentiation for investors. Having more humans to choose from who are in charge of deploying venture capital should, in the long run, be a great thing for founders and innovation in general.
In this piece, I will go a step deeper to discuss (and comically overgeneralize) across several investor archetypes to help founders better understand the various investor persona that can become a voice in the boardroom. Sometimes you’ll find multiple archetypes within one board member, and investors can be different personas to different founders. The point is that you will need a variety of these personas to build a productive board to support you, and different founders need different things. I collected these archetypes from my own experience on boards over the past five years as well as gathering stories from investors and founders alike.
1. The Cheerleader 🙌
This investor wants nothing more than to see you succeed and 100% believes you will. They are incredibly enthusiastic and responsive, and they make you feel good about yourself and your company every time you interact. They like/retweet every tweet from your personal and company accounts with plenty of 🔥🔥🔥, 💯💯💯 and 🚀🚀🚀, and they tell everyone how amazing you are, and they really really believe it. They will spend a lot of time working for you if you ask them to — whether it’s building recruiting pipeline, customer intros, or helping with financial modeling, and they will bust through second and third-degree connections to try to get you what you want. However, as they may be early in their own journey as an investor, they may not have as much experience nor as broad of a network, but this is also why they have way more time for you. Don’t rely on them to help you uncover your blind spots because they tend to only know how to be agreeable. They may also not have encountered as many tough situations as a board member in the past and might surprise you (and themselves) by how they react when the going gets tough and their conviction is tested.
2. The Veteran 🧙♂️
This investor has literally seen it all. They’ve been around since the advent of technology and seen companies be built and broken several times over by founders, investors, macroeconomics, governments, luck, and everything in between. They’ve accumulated decades worth of wisdom and pattern recognition and can be incredibly helpful in getting you out of the weeds and out of your own head, reframing the situation in a much clearer way. It’s often comforting to talk to this investor because they’ve had experience navigating through so many parallel events in history, and while it often rhymes, you may get sick of hearing about that time this thing happened to Google in 1999. They may have less to prove to the world based on having already achieved so much, so they may be more understanding of how to help you without their own ego getting involved when the going gets tough. You, other board members, teammates, and potential new investors may also become too reliant on the opinion of this investor. They are usually less emotionally involved as well and can be harder to build a truly personal relationship with. This might just be because they don’t have as much time for you because they’ve probably accumulated a significant number of portfolio companies during their decades as an investor.
3. The Operator 👨💻
This investor has had experience as a founder, and they will definitely let you know. This makes them easier to relate to as an equal because they’ve truly been in the trenches and probably had to deal with investors from your side of the table. They can be charismatic and optimistic, thus very likable, and they can offer you really specific operational advice on topics like closing a candidate, managing your board, and building culture. They also have real empathy for the lonely emotional rollercoaster you’re on and can offer plenty of personal anecdotes which will help you feel less alone. You can text them randomly and expect thoughtful feedback supported by actual experience. However, it might be hard for them to resist their own urges to tell you exactly what they would do in your situation and hard for you not to hear it if they do. They may also have a chip on their shoulder from their founder days and may want to scratch their operating itch by vicariously running the company through you. They may also need to be 100% bought in operationally to provide helpful feedback, and getting them on the same page all the time may result in some wasted time on your part, especially if they’re overfitting their own experiences and potentially guiding you in the wrong direction.
4. The Therapist 👩⚕️
This investor thrives on helping you develop as a person; they find fulfillment in their relationship with you and are committed personally to your eventual success. They want to know all about your vision, motivations, and struggles. They make it easy to open up because they are rarely judgmental. They give you energy, and inspire you to think and be bigger than you previously believed you could be. They never assert their own egos into your relationship and only talk about themselves when they can pull from their own experiences to help you. They value your trust greatly and usually deserve it, and they also trust you in return. However, of all the investor archetypes, this investor gets into your head the most, and they can be powerful and potentially manipulative when your incentives aren’t aligned. Also, if the trust between you is broken, it can be very painful if not impossible to repair and to win them back on your side again. They can also be lighter on practical help when it comes to making intros, closing candidates, or other operational advice.
5. The Auditor 🧮
This investor truly cares about serving the company and adding value by providing discipline through numbers. You can count on them to have gone through every investor update and board deck with a fine-toothed comb, and they will hold you accountable to what you’ve promised to deliver and ask you to explain the exact variance, in good times and in bad. They won’t sugarcoat your interactions and will be super helpful in helping you think through your metrics. They ask you detailed questions about comp and often ask you to justify your decisions. This might be useful for future fundraises, but some of their questions can be misdirected, micromanage-y and distracting, especially in the earliest stages. They may also push you to operate the board at a more formal level than is necessary for your stage.
6. The Expert 👨🔬
This investor has either been an executive or investor in your specific industry for many years. They know all of the ins an outs of the industry value chain and can help you shortcut some of your early trial and error. They have personal relationships with all of the c-levels of relevant customers or channel partners, and they can make high impact intros that will save your biz dev team a lot of time. However, as their view of the world is usually engrained into the incumbent setup, they may be more skeptical and provide feedback in a way that drains your energy or feedback that isn’t practcial for a startup. Their evolutionary (vs. revolutionary) mindset may also push you to be less innovative and take less risk than you typically would. If this investor is from a CVC, then you’ll have to be extra careful because they’ll have an extra set of incentives to navigate, tied to strategic rather than just financial goals for your company.
7. The Power Tripper 🤴
This investor has descended from an ivory tower especially to grant you the favor of providing you capital. Their view of venture capital is from the 90s when capital was scarce and VCs had all the power. They think it is their job to make sure you’re doing your job because you work for them. They almost never read the board materials and show up only to ask the really straightforward questions that are truisms and offer unsolicited advice that is never helpful. Their version of “adding value” is talking just to hear themselves speak. Because their ego is humongous yet fragile, they will not think twice before using the “bad reference” card to coerce you into doing things their way, and they will do it at the expense of their own returns if you don’t allow them to exert control. You probably don’t want this person on your cap table unless there aren’t any other options (including bootstrapping), but be careful because this VC persona can be disguised behind other ones.
8. The Celebrity ⭐️
This investor has built a name for themselves in an industry other than tech (🤯🤯🤯) and speaks to an audience you’re looking to reach. They are great social proof for the world outside of the tech bubble and can help you reduce your consumer CAC to near nil. They can also connect you to a host of other interesting characters from their world, none of whom care about the monochromatic tech hierarchy, which can be fun. However, they know very little about company building and won’t be that helpful outside of marketing clout, but on the flip side, they shouldn’t be that much of a hassle either.
9. The Silent Money 💰
This investor is very simple, they just want you to make them money, and they don’t really care how you do it. They are pretty honest about their value add—more capital for less of your time, and nothing more than that. They may never ask for or use their governance rights, and they’re basically just there for the ride. Because of their model, they do typically demand a pretty hefty ownership percentage which makes it harder for them to play nicely with the rest of your cap table. Once they’re in, they are pretty much zero hassle. They are basically public market investors with private market access and act accordingly. Therefore, if the ride gets rough, they are probably out because they have perfected their understanding of sunk costs and don’t have any ego attachment to your success.
10. The Ghost 👻
Similar to the Silent Money investor, this investor’s presence is rarely felt. You could’ve sworn you used to see them at board meetings and on Twitter with the 🔥🔥🔥, 💯💯💯 and 🚀🚀🚀 when things were going up and to the right, but nowadays you’re both wondering if that was a distant memory or a figment of your imagination. This of course, doesn’t really bother you except when you need them to sign off on important company decisions, and their assistant keeps telling you they’re on an island where there is no internet connection… but then you see them on Twitter congratulating some other team on their recent successful fundraise, and how excited they are to be along for the ride 😉
This is a great read Wendy! So true and laughed a lot :)
and entrepreneurs need them all :)