Member John Dicconson Speaks: Get Beyond ROI with Your Investors

The Challenge:

The case at hand was brought by the CEO of a technology startup in the hyper growth stage who was raising a second round of financing. He was hampered by his existing board that was prioritizing short-term cost cutting over hitting long-term revenue targets.

If you were in this situation, what would you do?

If I were in your position, I’d surround yourself with an investor pool that believes in your vision and has skin in the game beyond financial involvement.

As is typical with a rapidly scaling startup, you have a receivables-payables gap created by the direct expense of bringing on new business. And you’ve got a board composed of investors who are antsy about the revenue not catching up. If I were you, I’d dig in my heels and resist their calls to cut costs, especially those that impact direct or indirect sales efforts. Acquiescing would compromise your ability to hit revenue projections and diminish your pitch to new investors. This is the perfect time to root out current investors that don’t share your long-term strategic vision for the company. Buy them out, dilute them or don’t invite them into the next round of investment. Eliminate any influence that is perpendicular to your vision.

I’ve been in your shoes before. My first board was so focused on ROI that I spent weeks of my life preparing for board meetings, rather than actually running the business. Yet, this is the great evolution of the CEO. As you get more seasoned, you gain more bargaining power to compose a board that suits your vision, instead of their wallets. Go into this new round with enthusiasm: you have a company selling hand-over-fist. Any smart investor should jump to get a piece of the action. Just make sure you find individuals and organizations that have more at stake than percentage points. Get beyond financial investors and find those that also complement you at an operational level.