“I haven’t seen a good board guarantee a company’s success, but I’ve certainly seen a bad board guarantee it’s failure.” – Jerry Colonna
If there’s a set of topics that tops the charts of issues we hear most from our venture-backed clients, it’s stories about their board and challenging investor relationships. The tales are variations on a theme of opening up to the board, or showing vulnerability and having that backfire on the founder. Most founders know that investors care only about “numbers up” which adds to the armor that founders feel they need to protect themselves and their companies as much as possible. And, then, there are the moments when communication of feedback feels indirect versus direct (like when the board orders a 360, and the founder wonders why feedback needed to be anonymized). I’ve heard stories of controlling boards, and boards who set out to oust a CEO once funding is secured. Based on tales like this, why would founders and CEOs trust their investors?
On the other side of the table, what do we hear most from investors? That they wish to foster trust with their founders.
Often it’s the power dynamics at play in these relationships that foster this distrust. Specifically, I’m speaking of ‘power’ in terms of role power, status power, and personal power. More often than not, it’s the VC who comes into the relationship with status and role power. Founders are often struggling to find and assert their personal power (though, to be fair, VCs are people too and have a similar list of struggles to entrepreneurs). There’s a lot in the mix here, as it is whenever two or more humans are gathered around a venture.
As this podcast Extra conversation between my colleague Andy Crissinger and my co-founder Dan Putt note: anyone in an up-power position has 150% responsibility for their position. In light of this assertion, what, then, does it mean to be a more effective VC to a founder or CEO?
Let’s look at where things can go wrong for both parties. Unhealthy VC and founder dynamics can take shape on both sides of the table. As leaders, founders can give their power away, by not making decisions needed to build the company and through poor board management. When it looks or feels to a VC or board as if there isn’t a strong leader at the helm, the board gets anxious and jumps in. For founders, the relationship can go awry when they:
For VCs, the dynamic can go awry when they:
From the VC side (the side with 150% responsibility), healthy VC and founder dynamics require that a VC be more of a coach than an advisor. In this way, they encourage their CEOs to think deeply about their problems. While a VC may propose potential solutions or act as an editor to fill in the “blind spots” based on what you have seen elsewhere, this is best achieved via storytelling more than dishing out advice. When you ask better questions, such as open honest questions, and teach via storytelling, you’re deepening one’s ability to think and increasing resilience. All of which leads to a leader capable of creating better outcomes.
Doing so also creates space for the founder to come with specific requests for help when sought after. (Have you ever had someone in your life not listen to you yet spew advice all over you in order to fix a problem they may not even understand fully because they haven’t listened to you? What, then, are you most likely to do with their advice? Not much.)
Whether you’re the head of the company, team lead, or in the VC position, asking good questions and better listening can change a whole dynamic with those in down power positions to you. Here’s a handy list of questions (also known as a revised version of the Outcome Frame) to use the next time an investee (or direct report) comes to you with a question or issue they are sitting on:
I would be remiss if I didn’t offer something about the role personal power plays in our dynamics. Even if we find ourselves in down-power roles (in which there’s someone above us, or up-power to us), we still have our personal power as a sovereign right. Yet, depending on the circumstances, we can forget that we have any power at all (or even feel like we don’t have any power at all). If you find yourself in one of those situations, here are some questions to reflect upon to help you remember your power, identify where you give it away, and locate how you can best use it now:
The opportunity in any relationship that’s aware of their positions in power dynamics is the experience of being in “power with” versus the feeling of “power over.” This model and way of being is emergent when we operate from the right use of power and lean into generative interactions.