Honest Communication Is What Keeps Investors Happy
I’ve raised a few rounds of funding as an entrepreneur and CEO, and frequently I hear from upstart entrepreneurs who want to know how I maintain a good relationship with my investors. After all, it can be a volatile relationship. Many investors have never been entrepreneurs themselves, so they don’t always understand what you’re going through. But, at the same time, they’ve put their wallet on the line for you. How can you make sure everyone is happy?
What I tell entrepreneurs who ask me is: Be truthful. Don’t lie. That's the key to a healthy, productive relationship. This might sound like common sense, but little white lies run rampant in entrepreneur-investor relations, and it’s got to stop. We’ve heard over and over about scandals at companies like Theranos, where investors were left in the dark about whether the product they were backing even worked. Or, on a smaller scale, when was the last time you heard an entrepreneur assure an audience -- maybe even in the press -- that they were “crushing it,” only to learn that that their company was actually about to go under? Sometimes, it’s a near-miss. Yogurt brand Stonyfield Farm’s founder has admitted that he lied to investors about a bank loan in order to secure more funding.