14. Poor Investor Management

As a founder, you have to manage your investors. You shouldn't ignore them, because they may have useful insights. But neither should you let them run the company. That's supposed to be your job. If investors had sufficient vision to run the companies they fund, why didn't they start them?

Pissing off investors by ignoring them is probably less dangerous than caving in to them. In our startup, we erred on the ignoring side. A lot of our energy got drained away in disputes with investors instead of going into the product. But this was less costly than giving in, which would probably have destroyed the company. If the founders know what they're doing, it's better to have half their attention focused on the product than the full attention of investors who don't.

How hard you have to work on managing investors usually depends on how much money you've taken. When you raise VC-scale money, the investors get a great deal of control. If they have a board majority, they're literally your bosses. In the more common case, where founders and investors are equally represented and the deciding vote is cast by neutral outside directors, all the investors have to do is convince the outside directors and they control the company.

If things go well, this shouldn't matter. So long as you seem to be advancing rapidly, most investors will leave you alone. But things don't always go smoothly in startups. Investors have made trouble even for the most successful companies. One of the most famous examples is Apple, whose board made a nearly fatal blunder in firing Steve Jobs. Apparently even Google got a lot of grief from their investors early on.