5 Things That Can Go Wrong When Working With Investors

With the right investors and a smooth collaboration with them, you can increase your business’s success rates dramatically. However, working with an investor can go wrong—it has its own challenges.

You might think that finding an investor was the hardest part, but if you don’t know how to recognize alarming situations in your interpersonal interactions with investors, and deal with them accordingly, your cooperation can go downhill fast.

It is better to be prepared for unpleasant situations than to get blindsided by them. When you are well prepared, you’ll be able to prevent bad vibes with investors from progressing since you’ll recognize when something is going in the wrong direction.

Signs of a Bad Relationship with Investors (+ Solutions)

Here are some common situations you should beware of that indicate that things are going in the wrong direction when working with an investor:

1. They are trying to take control

You might have noticed that the investor has started to hog every board meeting, questioning investments, and diminishing your propositions. Such a situation is a case of an investor trying to take control of your board. Small businesses and startups can fall prey to investors who see potential and want to take over.

The board meetings should focus on strategy, checking-in on the profitability and health of the company, and making democratic decisions; not on dictatorial wrestling of control from founders. Therefore, as soon as you notice too much involvement that doesn’t make you comfortable, it is time to put your foot down and stop it right away.

How to solve this issue:

Being rude or attacking the investor isn’t the solution. As much as such a situation can make you irritated and angry, you need to talk to the investor in a rational and pleasant manner.

Let them know that their aggressive involvement in the board meetings is confusing your team. The board meeting's primary concern is to deal with strategic discussions and if they push the investment discussion you won’t have a chance to form a good work strategy. 

2. They are discouraging you from working with other investors

Working with more than one investor gives your company some security and you have every right to establish multiple collaborations.

“If an investor is trying to avert you from the idea of talking with other investors that is just the sign of insecurity,” says Angelica Willis, a business owner and freelancer. “Unless you made a deal that your investor will be the only one, it is completely up to you whether you’ll include another investor in your business.”

How to solve the issue:

Explain to your current investor that you have made an agreement that doesn't specify that you can't bring in more investors. Convince them that having more investors is good for the business and it is beneficial to all if the business thrives.

3. They are trying to impose unrealistic goals

When an investor spends some time in your company, they might start to think that they know everything about it. If the business is doing well, the desire for bigger returns on their investment can cause them to start having unrealistic expectations and goals.

Maybe they don’t have any bad intentions, but they just got carried away with their involvement. The moment you notice that the goal is unrealistic, inappropriate, or the time frame they suggest is too short, you need to stop it.

How to solve the issue:

Put your business first. Always remember that you are the one who knows your business best and what it can and cannot do. When an investor wants to set a goal that can't be met, don't allow that objective to be accepted.

It can help if you write down the goals of your business again so that they can have an overview of what type of goals you have that are manageable.

4. They want to change your team

It might happen that the investor gets in some kind of argument with a member of your team or they simply don't like them, so they are trying to get them replaced. They can come directly to you and ask you to fire an employee or they can make indirect remarks about the inefficiency of that team member.

If you don’t agree with them and you value that team member, don’t let them influence you to fire the employee or do something that you might regret latter. Having a successful team you can trust is crucial for the success of your business.

An investor’s personal opinion about your employees isn’t a reason to make changes in your team. While this can create an unpleasant situation for everyone concerned, it is not something that you can’t handle. You can handle it.

How to solve the issue:

Clarify to the investor that your team members are the ones that make your business function. No matter what type of personal problem they have with one of the team members, it should be put aside and they should act professionally. They need to understand that what is in the best interest of your business needs to be put first.

5. They have changed their attitude

Whether they aren't satisfied with the results of their investment or they've loosened up a little too much, you might begin to notice that the investor has started to have an attitude change about you or the business. This might be seen through some unprofessional remarks, obvious dissatisfaction, or even trying to start a fight.

Their attitude can be a sign of them wanting to exit or replace you. As scary as this can sound, it happens many times. Not all investors are inherently good people who want to see you become a star founder. Even if they don’t want to fire you, they might have some issue with you and you don’t know what it is since nothing notable happened.

How to solve the issue:

Open communication is essential for good cooperation. When you notice some negative change in the investor's attitude, talk with them plainly. Approach them and ask them openly if there is some problem that you probably aren't aware of but can change.

Tell them that you've noticed that they've changed and you want to clarify potential issues and solve them amicably. In case their idea was to get rid of you, showing them that you've noticed their behavior and that you won't let it pass will discourage them from pursuing that course and instead work with you to improve the situation.  

In Conclusion - Find the Right Balance

If you’ve already found an investor, congratulations! One part of your investment and business growth process is dealt with. Now it is time to focus on the other part – having a successful relationship with your investors.

Even though someone is investing money in your business, that doesn’t mean that you should let them take over and deal with it as they please. You are the one in charge who is building that business and what it represents.

On the other hand, you shouldn’t be rude or dismissive with an investor because that can hurt your business’s progress. The key is to find the right balance when working together.

Address these warning signs as soon as you notice the investor is giving themselves too much freedom. Deal with them appropriately and professionally.

With the right attitude, you can have the investor on your side and keep the business moving in the right direction smoothly and steadily.