The Story
A founder client of mine was in their fourth meeting with an investor. They’d made some progress on terms, but in the founder’s words: “The investor keeps telling all of these stories about founders they didn’t like working with. Founders who asked too many questions. Founders who slowed deals down. Founders who negotiated when they should have just closed.”
Those stories sparked fear in my client. Fear of straining the relationship. Fear of damaging their reputation with other potential investors. Fear of not getting that sorely-needed capital.
The message was clear: don’t be that founder.
After that message landed, the investor made the ask: a board seat.
Giving a lead investor a board seat isn’t unusual, and can be greatly beneficial with the right lead investor. Giving one to someone you already have doubts about is a different story.
And my client had real doubts. They had watched this person in meetings. They knew how this investor thought about the business.
The founder had one of those “trust your gut” feelings.
They ignored it. The investor’s narrative had done its job and kept my client from standing up for themselves. So, to avoid being “that founder,” they let the investor on the board.
Fast forward 18 months, and the “don’t be a difficult founder” investor was quite the difficult board member. They didn’t understand the business. They pushed the founder toward metrics that made no sense for the model, quarter after quarter. Everything the founder had predicted would happen, happened (and more!).
And the founder couldn’t just remove them. An investor-designated director usually can’t be easily removed. The founder’s only real option was to dilute that vote by expanding the board, which causes more problems of its own.
More meetings, more people to manage, more headaches. And only 18 months in!
The Real Cost
Here is what the “difficult founder” narrative actually costs.
Not a strained relationship. Not an albatross of a reputation. Not even a slower close.
The real cost is a board that doesn’t function (which my client saw coming!), a company that needs a united front but is fighting internally instead, and somehow even more stress than your typical startup.
All because an investor primed the founder not to push back.
Why The Story Exists
The “don’t be difficult” narrative is not accidental.
Founders who ask questions are harder to close on aggressive economics.
Founders who negotiate keep more of their upside.
Founders who push back on board composition keep control.
Economics and control are what a term sheet is really about, and some investors will use every tactic to tilt them their way.
The “difficult founder” story is so pervasive because it works. And it works because founders are under enormous pressure to close and to keep a “good reputation.”
Good investors tell good stories. And the good ones won’t flinch when you ask questions.
Asking questions and pushing back is not being difficult. It is the job, and it’s in your best interest.
The founder who asks those questions is not a “problem.”
They are the one who ends up with a solution: a board that actually works.
Know a founder heading into a term sheet negotiation? Send this to them before their investor tells them a story.