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Founders Are From Mars, Capital Providers From Venus Given their different views of the world, it's a miracle that they ever get together.

By Peter S. Cohan Edited by Dan Bova

Opinions expressed by Entrepreneur contributors are their own.

In 1992, John Gray published Men Are From Mars, Women Are From Venus, highlighting what he considered to be the different worldviews of women and men. In a USA Today interview last year, Gray summarized his advice for men who want to retreat to their man cave and women who want to talk about their day: "If we can understand our differences in a positive way and challenge our assumptions whenever we have a negative feeling, our relationships will be much better."

And while there are entrepreneurs and capital providers of both sexes, it seems to me, they think so differently that they might as well be from different planets. Venture capitalists and founders can come into conflict because the founder wants to control the company's future and the VC wants to triple his or her money in three years.

These two views come into extreme conflict when the venture capitalist wants to fire the founder, thinking this individual is blocking the startup's growth. The investor wants to be rich and the founder wants to remain king. This situation forces the founder to decide whether to give up control so as to boost the odds that he will get rich along with the investor.

Related: To Build Wealth, Treat Money Like a Jealous Lover

The quest for common ground. When I think of my own investing experience, I realize that it's amazing that founders and capital providers ever find common ground. I recently declined to invest in a company with a technical genius of high integrity because its growth forecast was too slow -- only about 15 percent a year. And I failed in my attempt to invest in a rapidly growing fitness-technology company that appears poised to go public because there were so many others who could better help accelerate its growth that were ahead of me in the scramble to invest.

As is the case with any market activity, both parties try to assess whether each will be better off if they cooperate. A founder fears the loss of control that comes with accepting outside capital and accepts an offer if the investor buys into the founder's vision and has a track record of helping companies succeed.

A capital provider wants different things depending on where she sits -- but mostly wants to at least triple her investment in three years and to a varying extent wants to help the founder to boost the venture's growth.

Related: Is It Ever OK for Founders to Sell Off Their Company Shares?

Differing agendas. A founder's attitude toward capital providers also depends on how fast the startup is growing. If a startup is growing very fast, the founder will be flooded with offers to invest but will take money only from an investor who will help accelerate that growth. If a startup is growing more slowly, the founder will be happy to take capital from any investor willing to accept such slow growth.

Capital providers vary in their attitudes toward startups. Lenders almost never provide capital to startups -- except unwittingly when founders borrow money from their credit cards and against their home equity. In these cases, lenders are receiving superhigh interest rates (and the right to seize the home and sell it) to compensate for the risk that they might not get paid back.

Customers can help startups by paying them quickly or even buying an equity stake, while suppliers may finance new companies by letting them take more than 30 days to pay.

Friends and family are often willing to write checks to new companies because they want to help a loved one to succeed. They think there's a small chance they'll get a return on their investment but the primary goal is to help the founder.

Angel investors write five- and six-figure checks for equity in startups if the venture is likely to be acquired or go public and if they believe that their expertise can help the venture grow.

The biggest pool of startup capital comes from venture capitalists, though. Some venture capital firms might look at 1,000 companies for every two or three that they invest in each year. They pick companies based on whether the startup is targeting a small market that will get big fast and whether they believe that the entrepreneur is a great CEO who will figure out how to win a big share of that market.

Related: Dividing Equity Between Founders and Investors

Managing the delicate investor-founder relationship. Ultimately, Gray's advice for better relationships applies: If founders and capital providers invest the time to understand their objectives deeply, they will have a productive relationship.

The key is to find activities where they can make the other party better off.

The founder who accepts venture capital, for example, must carefully hire his boss -- the general partner who will sit on the startup's board. That person must bring industry knowledge, a valuable skill that can help the startup grow and a reputation for helping founders during a crisis.

And the capital provider who invests in a startup must believe that thanks to the growth of the market it's targeting and the talent of its management team, the new company will further enrich the investor.

Related: Vesting: A Founder's Need to Earn Equity

Peter S. Cohan

President of Peter S. Cohan & Associates

Peter Cohan is president of Peter S. Cohan & Associates, a management consulting and venture capital firm. He is the author of Hungry Start-up Strategy (Berrett-Koehler, 2012) and a full-time visiting lecturer in strategy at Babson College in Wellesley, Mass.

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