When You Raise Capital, Think 'We' Instead of 'Me'
Q: How do I strike a balance between creating the startup I want to run, and making investors happy? I understand I will be working with their money, but it is my business.
-- Thulasi Ram
A: At the end of the day, when you raise money, the business becomes “ours” not “mine.”
Here are a couple of key phrases to always keep in mind following a major financing event:
1. Maximize shareholder return.
You’ve got to remind yourself that your goal as CEO once you have shareholders beyond yourself is to maximize the return for your investors. Following a financing event, you have to always keep their interests aligned with yours through that prism.
2. The CEO serves at the pleasure of the board.
If you set up a board following a financing event, then you need to remember that you while you will need to pay heed to those advisors, you still steer the ship. Not only are you running the company, in certain cases, entrepreneurs have the ability to "control" the board. So in essence, CEOs work at their own discretion. Still, in most cases, the CEO will end up with bosses. After all, the board is typically comprised of investors, and those investors are the ones who ultimately run the show -- in addition to the CEO, of course.
When you take other people’s money, you become accountable for the responsible use of that money -- legally, ethically and structurally. Thus, make sure you are ready for the change that comes with building a business with other people’s cash.
Submit your questions in the comments section below and those with the most likes from other readers will be answered. On Twitter, use the hashtag #YEask. Please include your first and last name, your location (city and state) and the name of your business in your comment.
For reprints and licensing questions, click here.