When to ignore your investors
Everyone has advice for you when you’re doing a startup. The problem is, a lot of it is just plain wrong—and it can be really harmful.
It’s most dangerous when the advice is coming from your investors because they’re so influential. They might have control of your company in a very literal sense, but even if they don’t, your natural instinct is going to be to listen to them, because they’re wiser, or more experienced, or “because they’re on your board”. And there are many cases where you should listen to them. But that doesn’t mean you should take everything they say as gospel.
The key to all advice is knowing when to listen to it and when to ignore it. Here are a few simple things to consider to help you make that call:
What worked for them might not work for you
Anyone’s advice—including your investors—is based on their experience, and that experience may or may not be applicable to your business. As a consequence, the playbook that worked for them won’t necessarily work for you. Your business is likely pretty different, so you can’t just take their guidelines and blindly apply them.
An example: One of our early angels really stressed the importance of retaining your biggest customers. I’m a huge fan of this angel, and the advice is also good advice. Why wouldn’t you want to retain your biggest customers?
But the advice was colored by the angel’s own experience as an operator of a company where the growth strategy was “Acquire everyone you can while they’re super-small. A few of them will become truly enormous—hang on to them for dear life and your revenue will grow.”
For Pilot, our revenue isn’t overly concentrated in a small number of our largest customers.
The winning strategy has instead been “get more customers of similar size to your current ones, in adjacent industries,” and had we exclusively invested in the “retain your biggest customers” path, we would have been unable to do that.
Just because it worked for your investors doesn’t mean it is appropriate for you—your businesses are probably not identical.
You know your customers better
I generally recommend you ignore your investors’ opinions on product features or specific marketing messages. Why?
You should know more about your customers than your investors do, because you’re the closest to what’s happening on the ground. You’ve spent thousands of hours talking to your customers, and they haven’t. If they’re really better-positioned to tell you how Feature XYZ should work, or what the marketing message should be, something’s deeply wrong, and you should fix it immediately.
Separately, the way you’re going to get to clarity on these questions is not by spending time with your investors, it’s by field-testing it with your actual customers. Unless your investors happen to be your target audience, they won’t be very useful here.
They know best practices better
Your investors can be a huge asset in helping you with general “business” questions—things that are important but not directly related to your core business. These are times when you absolutely should take their advice.
For example: How much should you compensate your new VP? How should you set up an enterprise sales team? What should your People process look like? What’s an appropriate amount of cash burn for a company with revenue of XYZ?
I am constantly emailing and texting our investors about these questions. When there are clear best practices or standard answers, you should always listen to your investors. There are no bonus points for being creative—follow the best practice and move on, focusing your attention and energy towards the questions and problems that are unique to your business.
All of the advice in this post clearly fits in this third bucket, which is why you should subscribe for more here: