This article was published on July 16, 2014

The Dos and Don’ts of managing the relationship with your investors

The Dos and Don’ts of managing the relationship with your investors
Daria Shualy
Story by

Daria Shualy

Daria Shualy, Don Draper at daPulse Daria Shualy, Don Draper at daPulse

Daria Shualy is Don Draper/product marketer at daPulse.

“Are you f***ing kidding me?” I shouted into my phone in the backyard of my favorite bistro. I was outraged, and screaming at my investor.

You should never shout at your investor (or anyone, for that matter). But at this point, it really didn’t matter anymore. I had already lost my own startup and now we were just dotting the i’s and crossing the t’s on our ugly divorce papers. The love was gone.

From the many mistakes I made as a first-time founder and CEO, the worst was how I ill-managed my relationship with my investors. On the entrepreneurs’ side, there are endless advice about how to raise funds; on the investors’ side, there are countless posts about how to invest. But both parties seldom talk about how to manage this precious, delicate relationship.

I had two wonderful, helpful investors on my side at the now-defunct Sense of Fashion (background: we raised $3.5M, had 20 employees and 200K uniques a month) Yaniv Golan and Jeff Pulver. I had also investors that simply weren’t the right fit — for me as first time entrepreneur, or for the business as a social e-commerce platform for fashion.

In both cases, the flawed way in which I handled matters, made things bad for both the company and myself.

The Don’ts of your investors’ relationship (a.k.a What I learned the hard way)


1. Don’t let anything but you be the reason for an investment

The reason for this is that you and your investors must be united. So many things need to happen for a startup to succeed, it’s almost a miracle some actually do.

At Sense of Fashion, my first three investors came because of me: my energy, ability to get others to follow and vision. But my fourth investor, the VC, didn’t come because of me. He came mostly because of one of my investors.

He’d wanted to be in business with him before, but it didn’t work out. Now he had a chance, and our impressive team made his decision easier. This made him push for my investor to become the CEO, to which I agreed thinking I should put my ego aside and do what’s best for my company.

I did this despite my co-founders telling me they thought this was a poor choice for the company. Not only was this the beginning of my long and painful way out of my own company, it was also the very moment the company started its decline. Not because my investor-turned-CEO was incompetent, but because I was the only person with the full complete vision of the company in her head.

The minute I stepped down from being CEO the company started zigzagging like a drunk in a darkened parking lot. SoF completely lost focus, execution ability and its unique value proposition, and began bleeding money and users to the grave (and on the way, had lost my two co-founders too).

2. Don’t let anyone else be the CEO 

…  at least not in the first three years of the company’s life. So many investors will ask if you’d be willing to step down from the role of CEO “if it’s in the company’s best interest.” Your answer should be a definite, non-negotiable NO.

There are two very good reasons for this. The first and most important is that for the beginning of its life, the company really only exists in your head, in your vision as a founder. That’s the only place where there exists a comprehensive view of the company’s potential.

The second reason is, as the owner of that vision, no matter how many people share it with you, you are the only one who will have the stamina to endure all the ups and downs. You are the only one with enough fire in your eyes to recruit employees, users, investors and advocates even at the worst of times. Jason Goldberg of Fab is my favorite example of this.

Get your company’s focus aligned then think about letting someone else take over for the benefit of growth.

3. Don’t overshare


This does not mean hide things from your investors. It means you shouldn’t bore them with every feature and thought that comes to mind, and certainly not with every concern – even if they are nice, friendly, patient and helpful.

You’re the founder and CEO, it is YOUR job to lose sleep. Oversharing gets the investors too deep into your decision-making process and worse — it gets them concerned, worried even. You do not want worried investors.

4. Don’t keep them guessing

The flipside of not oversharing is not keeping your investors in the dark. When investors don’t know what’s going on (assuming they still believe in you and give a damn) they get nervous and start sharing their anxiety and doubts with each other. This can result in over involvement and loss of trust in your leadership.

5. Don’t make decisions at board meetings

Board meetings are not for big, crucial decisions. They’re for updating. You have to manage board meetings in a way that will prevent them from spinning out of control.

At Sense of Fashion I had a very important matter suddenly come up at a board meeting and made a decision then and there. The outcome was disastrous. The fact that I wrote “suddenly” is an indication of my poor management of this.

The Dos of your investors’ relationship  (a.k.a. What I learned the happy way)


People say you can learn so much from failure. It is my experience that you learn even more from success.

Failure can be attributed to so many things. When you do something right and see the results, it’s easier to pinpoint what you did right and share it. Here’s what I’ve learned from a successful management of the relationship with our investors at daPulse.

1. Remember that you know best

Neil Patel once said “Successful people don’t always know what’s best.” The logic applies here, too.

Investors are successful people, with money and power that can be intimidating especially when you’re on the gratefully-receiving end. But you must remember that you know your company best. Not because you’re smarter, but because you live it daily.

You know all aspects of your startup, from the bugs to the happy tweet by a user, to the coder who’s getting married next week and is out of focus this week, to the vision mentioned before. The investors only know what you report.

While you should listen to what they have to say and give it thought, the decision should always be yours. At daPulse, we have brilliant charismatic investors like Eden Shochat and CEO of Wix Avishai Abrahami. These two, for example, can be very persuasive. While we often take their advice, sometimes we don’t. We stay focused on our roadmap the way we know it should be.

2. Come through confident

Your investors are here because of you. Let them know they were right to put their hard-earned money on you.

Back your confidence with real data and if needed with the opinions of experts. Know what you’re talking about and make sure it comes through in a reassuring, not arrogant, way.

3. Make someone else your confidant

friends coffee work

Every founder and CEO has difficulties, thoughts and decisions to make. Don’t make your investors your go-to people for these. That would be oversharing.

Find someone you can trust who’s both wise and discreet; someone who brings the best out of you . They don’t need to tell you what to do, but to help you see clearly, think out loud and come to conclusions yourself. It’s like having a go-to therapist.

4. Communicate in push, not pull

I got this great piece of advice from Gil Hirsch. But what we do at daPulse is even better — we do both push and pull.

Here’s how: We built a tool called an execution board with the goals we set and report it at the board meeting (for example, reach 250 paying customers in six months). We then give our investors full access to it.

This way, it’s both push — because we generate the data and put it live for them to see — and pull, because they can each check in at the frequency of their preference. It lets them stay completely updated about our progress, but we don’t dive into every small detail with them.

This creates a very balanced involvement : investors receive live numbers daily, and we manage data at our preferred level.

5. Frame the conversation

You don’t have to wait till you don’t like what they’re saying; frame the conversation from the get-go. This is especially relevant for board meetings.

Prepare the deck with all relevant KPIs and data and send it along with the agenda for the meeting about a week ahead of time. This will leave time for questions and additions to the agenda, for which you can then prepare.

Decks should be composed of two sections: One for reporting the same KPIs as the previous meetings, so progress can be tracked, and the other for focusing on what’s most important at this moment in time.

So, for example, one board meeting can be about how you plan to acquire new customers. Three months later, if you’ve got this nailed, you can start focusing on improving conversion, or MRR, or TROI etc. Just make sure it’s you calling the shots and that the discussion is framed and therefore productive.

What other advice do you have for maintaining a successful relationship with your investors? I’d love to hear your thoughts.

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