What makes a great founder investor relationship?

Fundraising is a personal decision for a founder - there isn’t a right or wrong, only what’s right for that founder. You might be able to grow your startup with the money you make from your customers (this is called bootstrapping), or you may have ambitions that can’t be funded yet by customers alone. 

When you bring on an investor like a VC, you’re selling a piece of your company for that investment. You now have someone invested in your company’s success besides you, someone that believes in the ambition you have and has invested their money to help you scale your business alongside your ambition. There’s a reason we describe the investment process as like falling in love; as Blackbird Partner Sam Wong says, you should feel like you can learn from them, and that you can have robust intellectual debate with them. It’s a love grounded in your roaring potential - we’re falling in love with someone for who they can be, not who they are. 

VCs typically work on a 10 year time horizon, and at Blackbird, our belief in being generational owners of generational companies means we might invest for even longer. Because of this, you want to feel confident that the person or group you have sold a piece of your company to will still be someone you can learn from in 10 years. That their belief in who you can be will continue to help you call that forward in yourself. 

I get to witness the founder and investor relationship in technicolour every day at Blackbird - it’s one of the best things about my job. But it still feels like there’s a lot of misconceptions about this relationship - how founders and investors work together, what power an external investor actually has on a founder, and how the relationship might grow or change with time. 

To dig into this further, I spoke to some founders that know a thing or two about the founder-investor relationship - Matt Fairhurst, founder and CEO of Skedulo, Cameron Ferris, co-founder and COO of Inventia Life Science, and Kate Glazebook, co-founder of Applied (who has since joined Blackbird as Head of Impact and Operating Principal) - alongside Blackbird Operating Partner Robyn Denholm and Investments Associate (not to mention Wild Hearts host extraordinaire) Mason Yates. 

Let’s dive in!

The beautiful beginning

Raising your first investment is by all accounts equal parts terrifying and invigorating (mostly terrifying). It might take weeks or months, and it isn't glamorous. It is hard work. Whether you’re spoilt for choice or starting from scratch, both Matt and Cameron say it’s important to understand the role and value of an external investor, and to choose your investors carefully, with an emphasis on values, trust and the long-term relationship.  

“In the simplest terms I think the role and value that a VC can provide often gravitates to either access or aggregation,” says Matt from Skedulo. “Access in terms of access to a much broader network of potential talent, other investors, founders or advice that it would otherwise be difficult and time consuming for a founder to access on their own, and aggregation in terms of having visibility and perspective over many different companies, leaders, approaches etc across their portfolio that can be useful when needing insight into how other companies/founders/leaders address and tackle challenges.” 

In the beginning, Cameron, Kate and Matt stress the importance of having trusted, values-aligned investors that will be in the trenches with you, finding solutions together. “When Blackbird led our Series Seed in 2014 it was really just Niki and Rick, so a really high fidelity relationship between investor and founder both in their super early stages” says Matt. “This meant the relationship and interactions were fast moving, creative and energetic”.  

“Scaling a world-changing business is ridiculously hard and requires the VC and founders to be aligned and steeled for the mission” says Cameron from Inventia. “The first time we raised capital we naively weren’t looking for much beyond money. We’ve since learned that, like many things, it is the people that matter most - so the biggest change has been the weight that we place on connection and values-fit with our VC partners. It’s such an important relationship.” 

When it comes to quantifying these values into your early decision-making, Mason suggests five key traits that point to a great investor:

1. “Great investors see your roaring potential. After the second meeting, ask them - why do you love my company? Do this across all your investors and pretty quickly you’ll learn who can’t stop thinking about you.
2. Great investors are great people. Great investors are there for you in the lowest moments, and push you to reach the heights of your potential in the highest moments.
3. Great investors ask good questions because good questions lead to good answers. Look for people who ask questions to see how you could succeed, not fail. Great investors have been exposed to hundreds of scenarios like yours before , but they don’t force advice on you. Every unicorn broke a rule to get there and the best investors are humble enough to know that.
4. Great investors think long-term. They aren’t transactional, they’re in the business of relationships. A transactional investor thinks win/lose (instead of win/win) and thinks about the round today (not the next five). Look for long-term thinkers because it’s a leading indicator to how they’ll think about supporting you and your business.
5. Great investors come with an army of support. Great investors arrive with much more than capital. Great investors have great advice, help you hire, help you transform from founder to CEO, build an ecosystem around you, and are as ambitious as the founders that they invest in.

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‍From early to growth stage

While there’s big decisions to be made as you bring on your first investors, if you continue to grow and scale your ambition, you’ll likely bring on new investors along the way. 

As Matt says, by a growth stage, typically there’s a lot that is working in the company already. “I found myself asking the following questions when we raised our last round, or considered new board members/advisors: 

• Can this firm or partner help me grow into the next chapter of leader that will be required in the future? 
• Can/How will they be able to help the team and company through the likely chapters of growth in the next 2-3 years? 
• Are they fundamentally aligned with the mission and vision of the company? 
• If so - how can their experience or network help to amplify this mission? 
• Will they be able to continue supporting the company through the next chapter of investment/fund raising?”
  

At this stage, it’s worth considering how your current investor relationships are serving your ambition, and how you might solve for any gaps through prioritising these areas in bringing on new investors, or working with new leaders from your existing investors. Since joined as Operating Partner at Blackbird early last year, Robyn has been working with our late-stage companies to help them reach their beautiful potential, including Skedulo. As Matt says, “it's great to see how much Blackbird has changed and the impact they're creating - now as a much larger group of people still oriented around a similar large vision for the future”. “This growth has provided a far deeper operating bench that can help with things like recruiting, legal advice, analysis etc. I'm really grateful for the many years that Niki spent on the Skedulo board and continues to be a friend and mentor. Robyn Denholm joining the board in 2021 has had a huge impact on me as a founder and CEO, our board and the depth of experience that she can provide now as a board member at Skedulo.”

Kate and Mason describe the strongest relationships at this growth stage as rooted in self-awareness and a mutual growth mindset. “For both founders and investors, one’s ability to realise what they don’t know, and be able to admit it and ask for help or learn from others will save heartache and mitigate risks” says Mason. “An investor should know when a founder is right to follow their gut, and a founder should have the confidence to ask for help.” 

“You want someone who can balance the championing when you’re in the trenches, with the challenge that says “I think you can go even further on this”. It’s tricky, but powerful when you get it right,” reflects Kate. “An investor that is aloof won’t help you expose the challenges you need the most help with, even if they support you with their words.”

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More than Money 

I’ve seen plenty of misconceptions abound regarding the founder-VC relationship, helped by bad actors on both sides. And the facts of the matter are that bringing on any additional owner in your startup is going to come with an additional voice, particularly if there is a board seat involved. There’s many ways you can safeguard against this legally and structurally, but in terms of the relationship, the founders say it comes back to trust and true partnership.  

“Because the act of getting investment is inherently disempowering for founders, it’s hard for them to switch gears once they have to understand that their investors want them to succeed and the best way to get their help is to be candid about the things that you need help with,” says Kate. “Investors see a lot of not just the good but the bad and the ugly; they’re there to support you.”

“I think there’s a lot of misconception out there that a VC’s goal is to keep a founder in check, whip them to work harder, or tell them how they should run the business,” says Cameron. “Of course there is an important place for good governance, but ultimately our experience has been that a relationship is characterised by genuine partnership and mutual support.” 

Cameron’s other major misconception about VCs turned out to be happily incorrect. “I originally assumed that the relationship was primarily one-to-one... VC to Founder, or VC to business,” he explains. “I now appreciate that the relationship is really one-to-many, where true value comes from an increasingly rich ecosystem of founders, investors and creators that generates a flywheel of ambition and impact.”

As investors, both Robyn and Mason acknowledge the common misconception of investors caring only about the money. “Investors obviously care about the traction,” says Robyn, “but we care and spend so much more time on everything that drives traction. We care about the people joining the company on their mission, the innovation process to deliver world class products, the founder’s development to scale into a CEO of a 10, 50, 150 and 1000 person organisation. Most importantly, we care about the long-term decision making that will hopefully help the company reach its highest potential.”

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Long-term impact

At the end of the day, as Matt says, an investor is just like any other partner or relationship in a business. “They're relationships that you have to invest in and nurture and understand the value dynamic between the two organizations…like all relationships it comes down to individual humans and personal relationships”. 

“Blackbird have backed Inventia from Seed to Series B and the best thing about the relationship is that, at the core, it hasn't really changed at all,” says Cameron. “Through years of rapid change in the business Blackbird have remained steadfast believers in our vision, trusted advisors and true champions of our mission to build a generational business with lasting impact on human health.”

“You’re looking for someone you trust to have open, frank conversations with,” says Robyn. “There will be plenty of great and not-so-great times, and as well as money, an investor should be a trusted sounding board to help the founder realise their aspirations for their business.”

“The best in me is serving the best in you,” concludes Mason. “Everyone is different and responds differently, great investors are great at identifying these differences and will find the best in you.”

Regardless of the investors you seek out, I hope that you will look for people who believe in your ambition and can support you at every stage to deliver on it, who are values-aligned and respectful, and who will grow with you and your idea over that ten-year VC horizon. 

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‍I hope this has been helpful! At Blackbird, we want to invest as early as possible and even as we get bigger, we’re still writing cheques for 25k. If you’re an early stage founder, you can meet a variety of great investors and advisors and get connected with our Blackbird investment team through our Giants program. Applications are open for Cohort 4 now and you can apply here.