How Investors Will Impact Your Company’s Culture

Business People

When investors inject money into a technology startup, it’s inevitable that things will feel different. And the first thing that’s going to change will be the company’s entrepreneurial culture.

That can be daunting not only to the founder, but to those who signed up early to pursue the company’s vision. “The founders are worried about their baby, and investors are looking to make the most of their money,” says Steven Cerri, founder and president of STCerri International, a San Ramon, Calif., training and coaching company focused on engineers and technical professionals. If the founders are used to operating in a loose sort of environment, where their team knows everything and decisions are made around the coffee table, the new business focus can be a major shift.

Putting Things in Order

Investors are going to push for formalized meetings and regular financial reporting and processes. “That might not exist until someone forces it,” observes Naeem Zafar, a startup advisor and faculty member of the Haas School of Business at the University of California, Berkeley.

But that’s a good thing, he maintains. “Investors want to see financial statements, and they want to know what progress has been made,” he says, noting that such changes often result in better financial outcomes for everyone. And, to state the obvious, investors come with the money needed to take a product past the beta stage, to market, or for other critical tasks. You’ve got to accept the fact that money comes with strings.

Butting Heads

Starting a business is an emotional process. So is being one of its first employees. Each can be driven by a range of factors, from making a ton of money to changing the world. Investors, on the other hand, are focused on the money side. “They’ve seen startups come and go,” Zafar notes.

The differing perspectives are sure to create tension. The startup’s original cast might not understand the investors’ decisions, and certainly won’t always like them. That’s not always as big a problem as it might seem, especially if the investor is a serial entrepreneur or a veteran of the tech world.

Either way, Cerri says, entrepreneurs often want to convince investors that they’re correct and the investor is wrong, and that’s not going to happen. The reality is, “You have to meet somewhere in between.”

The biggest problems appear when you get an investor who isn’t wise to the ways of the tech world. “In some cases, the tech rules are just not written yet,” Zafar says. “It’s a very fast moving environment, and people often don’t have the expertise to understand that the old rules don’t apply.” That can add another layer of frustration to the team who’s been living and breathing the technology, along with the product, over a period of months or years.

No matter what you think about such changes, you’d better get used to the idea that they’re going to happen. If your company’s looking for the big payday that comes with an acquisition or IPO, at some point investors are going to get involved.