Entrepreneur and Investor Alignment!

As a startup evolves, friction may arise between the entrepreneur and investor, because their interests may no longer be aligned. For example, the founder may get an offer to be acquired and he may want to sell out, but the investor is not keen about this option, because the acquirer is only interested in the founder - not in protecting those of the earlier investors, who have now become irrelevant.

While the investor's rights are spelled out in the shareholder agreement, if they block the deal, this ends up hurting everyone, because if the founder's heart is no longer fully engaged in running the startup, it is bound to flounder.

This is why assessing the founder's character is so important! Will they stand by their investor, or will they put their interests first?

If you need to go to court to find a fair answer, this means the startup is doomed, and you might as well write it off!

This is why it's so helpful for the founder to write out their plan for the startup in their own words. How will they protect their investor's interests?

Now I understand they may not honor their commitment when push comes to shove, but if you remind them of their personal resolve at this time, cognitive dissonance will kick in and may prevent them from shafting their investor.

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