Venture capital dealmaking and fundraising rose to record highs, more homegrown startups achieved unicorn status, and the number of exits began to rise.

While these stories paint an image of breakneck growth, founders in the region have discovered another side of the picture, one that’s less often told in the popular narrative—that of the friction that can arise between entrepreneurs and their investors.

At times, this friction is merely a matter of different parties learning to adjust to each other and work together. At other times, it leads to horror stories of mismatched goals, incompatible perspectives, and ineffective partnerships.

This doesn’t have to be the case. “A good functioning set of VCs is supposed to help you build the company,” says Peng T. Ong, co-founder and managing partner of Monk's Hill Ventures.

While VCs do bring value to the table in terms of strategic advice and a wide network, we at Monk’s Hill Ventures believe that CEOs run the ship—and investors should give them the space and support that they need to do so.

Here are some strategic steps that VCs and founders can take to collaborate better and create winning companies and teams.
‍

‍

VCs shouldn’t act like bosses, and founders shouldn’t expect them to

A good VC helps companies think about their strategy and next steps, and even challenges their reasoning. But while we have operational experience and do help CEOs network and brainstorm, we make it clear that ultimately, they’re the boss.

“The way we work with entrepreneurs is to figure out how to exchange ideas and thoughts. If I’m not able to convince the entrepreneur of some idea I have, maybe my ideas are wrong,” says Peng.

“We tend to keep our egos in check—we push hard and have intellectual  debates, but in the end, we're very clear on who owns the decision. The CEO does,” he adds. At other times, the CEO may also delegate the decision to his team member.

For instance, in 2019 Monk’s Hill Ventures led a US$6.8 million series B funding round for Glints, a tech-enabled recruitment platform. That same year, Peng had a discussion about whether Glints should focus on local recruitment or make a major push into remote and cross-border hiring.

Even though they had different takes on this issue, Peng trusted Oswald Yeo, co-founder and CEO of Glints, to run the business. It helped that the board’s role as advisers—not decision-makers—was clear.

Everyone knows what came next—Covid-19 and the new normal of remote work. Oswald’s instincts paid off,  as did Peng’s support of his move. “A lot of companies are starting to realize that it really doesn't matter where your people are. You can hire and build a team from anywhere,” says Oswald.

“We’re very glad that even though there was not 100% agreement on where to put all the resources in this case, Peng trusted the team to run the business, and that led to a good outcome,” he adds.

On the other hand, a sign that a startup might not be executing as it should is when investors have to roll up their sleeves and make operational decisions. Few investors want to do this, as this is typically a sign of trouble within the company.

‍

Make sure the board knows its role and fits into the company culture

When boards have no clear idea of their responsibilities, friction tends to arise between founders and investors. This makes it crucial to define the roles and responsibilities of board members before they commit to the company.

For example, does the CEO welcome the board’s help in finding candidates for major, strategic roles? Or would he or she consider this as overreaching? Are board members expected to help the company break into new markets by introducing them to potential partners, setting up meetings with regulators, or helping them vet country-level company leaders? Can the board veto decisions involving a business model pivot?

At the same time, investors should understand and respect the CEO’s role. During fundraising talks, they must be open with founders about the extent of involvement they desire when it comes to strategy and decision-making.

On top of that, Oswald believes a functional board should come with the right culture fit and skills fit.

This doesn’t happen by chance. For Glints, Oswald intentionally put together a board comprising investors who cared about the business’ long-term health and performance. He made it clear that the startup would avoid pursuing hypergrowth at all costs and chasing the next fundraise.

“If it is not the right investor that you think you can work with, no matter the amount of money [they are] offering you, I think you shouldn't take it,” says Oswald.

This is what makes Oswald a unique entrepreneur, according to Peng. Few founders can say they have put together a highly functional board through strategically selecting and courting specific investors.

And once the investors come on board, Oswald makes sure they never forget the company’s North Star. He starts every board meeting with the same three slides that show Glints’ vision, mission, and values. It’s a simple routine—but it helps align the team and board members, leaving no doubt in anyone’s mind as to Glints’ long-term goals and core values.

‍

Founders must know why they want a certain investor on board

Founders and VCs must never treat a board seat as a negotiating chip. They must instead focus on the strategic value of working together, especially when founders bring in investors with relevant experience and the right network. VCs should be able to partner with founders in bringing the company to the next level.

For instance, Oswald chose investors who could provide strategic input and lessons relevant to Glint’s  industry and goals. One criterion was for the board to have B2B sales experience, as Glints’ business model has a B2B component.  

With the board’s help, Glints discovered an opportunity for growth through moving beyond startup and SME sales into enterprise sales.

“That might have taken us another six or nine months to figure out ourselves. But because we had a good board of investors we could learn from, it accelerated our growth,” explains Oswald.

Another reason Glints wanted Monk’s Hill Ventures on board as an investor was Peng’s background as an entrepreneur. An investor with experience being on the other side of the table could better understand a founder’s perspective and share lessons learned from building companies.

‍

Collaboration is crucial to success

In a region that’s making a name in the global VC funding scene, beliefs about the investor-founder relationship are rife. Some tales sound like every founder’s dream; others are cautionary. While most of these stories may not paint the complete picture of both the founders’ and investors’ experiences, they do tend to come with a grain of truth.

After all, partnering with strangers to build and scale a company for the long  haul is a daunting task. It’s important for these strangers to become trusted partners—and that can be achieved with transparency about each other’s roles, intentional decision-making, and mutual trust.

Learn more by tuning in to a recent webinar hosted by Startup Grind, where Peng and Oswald discussed how VCs and founders can collaborate to create winning companies and teams.

‍