A. Sam Richardson writes:

The most telling discussions often occur outside the sanctity of the board room. If you feel that your relationship with one of your VC investor directors (or any other director for that matter) could be improved then I would suggest you proactively try to achieve this with some direct communication or a face-to-face meeting. Establishing a clear understanding with your VC will enable you to avoid specific flashpoints and differences of opinion becoming entrenched and creating ill feeling.

External investors can sometimes view growth and expansion plans for young companies differently from the entrepreneur. While interests should be broadly aligned, a VC will always be calculating their own return and this may lead them to question significant investment in internal resources and infrastructure when a partnering or license model might provide a more capital efficient expansion strategy. Alternatively, an entrepreneur may want to expand less aggressively to avoid equity dilution from capital increases and more importantly maintain ‘control’ of their business.

The c-word is often the most emotional issue for founders to wrestle with as their business grows. The ‘horror stories’ you should want to avoid are those involving companies that failed to deliver a return to their shareholders. Maintaining control of a business going nowhere should never become the preferable alternative. If you are successful in growing your business, the demands on senior management and their roles will change and develop as a result of that success. If you remain indefinitely the best person to fulfil several of these roles then it may be that your business is treading water.

The best way to enable you to ‘stand your ground’ is to build confidence with your investors by delivering on targets and managing their expectations. If strong differences of opinion remain, be pragmatic about which battles you really want to win. VCs have no real interest in meddling in day-to-day portfolio company decisions but in small companies board discussions too often veer from the strategic to the operational. This can often occur when the CEO is the only executive on the board and therefore appears to need more operational guidance because fellow senior execs are not there to provide ballast. By demonstrating the experience of the team you manage as CEO and their buy-in to company strategy you should experience less push back from your VC board members.

Sam Richardson joined E-Synergy Ltd as investment director for the Sustainable Technology Fund, and was part of the core team that spun out Curzon Park Capital. www.curzonparkcapital.com