Investments

Burning bridges with investor - hate to do it but can't help it. Any advice?

Michael Epstein Founder at Zap Technology

November 15th, 2016

Not only it is business acumen but a common sense that one should never burn bridges with angel investor. 

An angel investor funded our company. It has been more than a year and while we are underperforming in terms of sales, there is absolutely no support from the angel investor in terms of advice, leads, referrals etc. Only time we hear from investor is during monthly update and ongoing dissatisfaction presented by the investor due to low performance. Our performance is at par with the competitor who had even lower sales than we have during their first year and now is multi-million dollar company. We really had it enough as there is absolutely no trust and understanding of investor on the company. We are stuck now. Have any suggestions on what should we do?


Irwin Stein Very experienced (40 years) corporate,securities and real estate attorney.

November 15th, 2016

You took the investor's money, are under performing your own projections and you are unhappy with the investor?  Had the investor promised to give you support, leads, etc.?  What should you do now? Make the sales that you told the investor that you could make.  Stop pretending that it is the investor's fault.

David Martin

November 15th, 2016

Pick up the phone- call investor-discuss issues.

Andy Freeman Product Management and ... - Looking for new opportunities

November 16th, 2016

The original question is ambiguous.  We don't know whether the company is underperforming what it predicted at time of investment or whether it is "merely" underperforming what the investor expects.

However, one thing is clear, the expectations of the company and investor are now not consistent.  The company is expecting more help and the investor is expecting more sales.

It's a bit of a red flag when the company talks about "unwritten principle" wrt investor help.  Did the investor agree to that BEFORE investment?  (When you take "smart money", you get explicit agreement on both the "smart" and the "money".)

It's also unclear what the company means by "burning bridges".  What, exactly, are you considering?  The right answer is "we're going to keep our investors informed, ask for help, and work like crazy".  Note how that doesn't depend on how the investor feels or acts....

Vinod Keni

November 18th, 2016

Michael, I am an angel investor and have been investing for a few years now.  Angels tend to be of two kinds - the passive investor who will provide capital only, and the active investor who may support with network and market access, advice, mentoring, and recruitment support.  

In my experience, the savvy entrepreneur has asked me and is always communicating with me on a regular basis with questions or seeking assistance, or looking for feedback.  There are some who do this once in a couple of months.  And of course, there are some that do not even ask.  In those situations, I have reached out and asked if they need any help, and some say yes and some say no, thanks.  

I think you should reach out, talk and discuss the current situation with the investor and ask for feedback, suggestions and how you can repair the relationship.  Burning that bridge may be expensive.

When you took the money from the angel, did you set those expectations or ask?  

Irwin Stein Very experienced (40 years) corporate,securities and real estate attorney.

November 16th, 2016

Mr. Epstein: I don't know where you get the idea that "most start-ups" receive support, etc. from investors.  Most companies seek investors to get money. If you needed help, it tells me that you could not accomplish what you set out to do with the team that you had. For the most part investors are passive. That you have not come across a start-up that has not expected more than money demonstrates the limits of your experience. An active investor who is going to help the company usually sets out exactly what they intend to do. At the same time, investors do not expect performance based on "comparable companies". They expect you to perform in accordance to your own projections.  You tell an investor what you can accomplish with their money and they expect that you will do exactly that. It would be one thing if the investor promised to purchase your product or said "I can get you a contract to supply GM" but that is not what you are saying.  You need help? Find it elsewhere and stop complaining that  the investor did not provide it.

David Martin

November 16th, 2016

Epstein, There is no "unwritten rule" that investors help the company.  That is something you either made up or were poorly advised on.  That is a false assumption.  Does it happen at times, yes, but there is no unwritten rule.  Many VC firms do this and yes larger private equity funds, but it is written out prior to the investment.

The fault is two fold here, yours and the investor for not establishing better communication on what each expects of the other. 

You should have set milestones, and he should have demanded them and been clear on them.  At the end of the day, run your company and stop making excuses, and that is what it sounds like to me..excuses.  And you are doing it in a public forum so I hope you are not needing future investments because any investor reads these and they could be discouraged from investing.

Not all hope is lost though...again..pick up the phone...express your concerns.  Establish milestones.  If you can not meet them by yourself express the desire to bring on an advisor or board member who can provide you what you need...or another employee.

You gained the investment, but man..you are going to be hard pressed to find sympathy in wanting the investor to run your company as well.

Michael Epstein Founder at Zap Technology

November 18th, 2016

Thank you all for response thus far. Yes, we did miss our forecast which now seems unrealistic milestone. I own this mistake. But at the same time, investor is comparing us with the competitors who are currently $500M company not realizing that our sale thus far is actually better than the multi-million dollar company he is comparing. Yes it is my fault that I missed the target set at the beginning of the books but at the same time we are performing far better than 90% of similar companies in the category. Rather than supporting, investor is constantly bringing our morale down by comparing with $500m company not realizing that it is not fair comparison - fair is compare us with them when they were in their initial stages. 

2. By burning the bridges mean, I should just ask the investor to exit  - give his money back or pay whatever he is asking. He is clearly not happy and nor we. 

Valeriia Timokhina Eastern Peak Software: Custom software development

November 17th, 2016

From what you're saying it seems that you really can help it. You can look for other sources of funding.
  • There are other angel investors and VCs you can go to and ask for help. Introduce your product and who knows, perhaps you'll have a better luck.
  • Crowdfunding
  • Grants
I'd also recommend you this article, part "Sources for funding": "How to develop an app when you have a great idea but your budget is limited"

Josh Benjamin Founder of Lifechime | Authentic Human Being

November 22nd, 2016

Michael, you mention expectations many times, so it sounds like a communication breakdown. This seems like an awesome leadership opportunity for you to transform your investor into a rabid supporter! By listening really well to understand what matters most to them, integrating that with where your company is headed, and feeding that vision back.

David Martin

November 17th, 2016

Michael, I know you are holding on to your perception.  All I am telling you is there is no "unwritten rule" that an investor is required, assumed, or expected to do anything that is not expressed in contract and in the formation of a company period.  I have studied entrepreneurship at the graduate level so I know what the "book smarts" education says.  And I have practiced entrepreneurship outside of the university myopia so I know what the "street smarts" education says.  Your theory is found in neither.

Now, you can hold on to that under what I assure you is an insulated viewpoint to you and the people you are talking to, or you can admit that proper communication on your part in the past was not achieved.

The fact that you gained an investor is something many can not do.  Taking the approach that you are going to "burn that bridge" because this investor is not providing you something that you have not asked for or discussed or have in writing...seriously reads like you are one of these whiny Milineals who feels entitled and wants a blanky and hot chocolate when they don't get what they feel entitled to but are not.  

Again, not saying that to try to be rude, but I am still seeing excuses.  You are a CEO...brass up and address the situation head on with positive resolution, rather than whimpering in the closet and planning a negative campaign of destroying a relationship.  I understand the frustration toward investors at times, but if you are closing communication then you are done..not only with this investor but sooner or later down the line.  Best of luck, hope it works out.