Striking a long-term friendship with investors can help entrepreneurs network, find clients and guidance in a trusting environment, but too much closeness can backfire
With clients, it’s always a good idea to be friendly, but when it comes to investors, it can also work against you
It was a casual dinner conversation in early 2018 that led Hari Ganapathy to Kumar Vembu, a prospective investor. Within half a year, Vembu became the lead investor in Ganapathy’s Chennai-based startup Pickyourtrail, a travel planning platform, and was part a of $3 million funding round. The friendship didn’t stop there though.
Ganapathy constantly keeps in touch with Vembu, GoFrugal’s CEO, bantering with him over WhatsApp, calling him for advice and meeting regularly. “The days of a formal relationship with your investor are far behind," says Ganapathy. “In today’s business environment, being friendly, candid, sharing updates or talking about your vulnerability helps bolster your business and makes you connect with the other person at a deeper and personal level."
With the startup culture fast becoming more informal, the line between what’s professional and what’s friendly are blurring. Business meetings have become casual, with conversations over WhatsApp messages, deals over drinks and new companies starting over coffee.
Founders develop friendly relationships with investors to network, scale and expand their knowledge and effectiveness.
FREEDOM OF EXPRESSION
It’s an informal atmosphere that empowers every employee to express themselves, and allows for contribution of ideas from everyone, says Apoorv Ranjan Sharma, angel investor and co-founder of Venture Catalysts, a seed investment firm based in Mumbai. “It’s a clarity-focused culture that values ideas more than protocols," he says, adding that the startup workforce is primarily young, millennial and people prefer to talk business in a casual manner, in spaces that allow them to express freely.
Ganapathy knows most things about Vembu’s personal life and vice-versa. The easy-going camaraderie that he was able to establish with his investor has been helpful not only for funding but also future networking. Vembu introduced Ganapathy to new clients and subject-matter experts. “We have interacted with leadership teams in Via, Goibibo and been able to learn about scaling and product solutions," says Ganapathy.
Before putting in the money, investors want to see how the founders are to work with.
Noida-based Varun Mirchandani, founder of online background-checking startup HelloVerify, was in Y Combinator’s 2018 batch in the Silicon Valley when he went to meet a potential investor. “Within two minutes into our process, as we started explaining our deck, the investor switched to telling stories about his travel," says Mirchandani, 36. He thought the investor was bored of the pitch. But 20 minutes later, the investor said he will invest on certain terms. “I couldn’t believe it," says Mirchandani. The investor remains HelloVerify’s biggest one till date. Mirchandani doesn’t wish to reveal the name of the investor.
Like Mirchandani, Zoya Brar, 30, founder of CORE Diagnostics, a clinical laboratory, believes networking is more effective if it’s with the help of friends. “In ‘authentic’ relationships, conversations can be more free-flowing and cut across a spectrum of topics," says Brar.
When her startup was looking for Series A financing, she reached out with a pitch deck to her father, a partner in Silicon Valley’s Artiman Ventures. “He was the first investor in my company," says Brar, adding, “He’s a roll-up of friend and coach who is vested in my company both as an investor and a parent."
Instead of conflict of interest, Brar believes the relationship with her father has evolved so they can handle challenges more honestly. “We know we are coming at a problem with pure intentions and are able to go through challenging issues relatively stress-free," she says.
Watch out for pitfalls
Being friendly with investors can really help, as they can open doors for you and get you new clients through referrals. It’s always a good idea, however, to keep a healthy distance, says Madhvi Walia, 34, co-founder of Tracecost Inc, a construction technology startup.
Her caution comes from her experience. Last year, over dinner and drinks, Walia was stumped when one of her clients casually asked her to share their competitor’s data. “They assured me that I would get more work from them if I do. All with a smile," says Walia.
She sipped her drink, stepping back mentally from the easy-going, friendly atmosphere. It was hard to deny the request, especially because of the informal environment.
She resorted to humour. “I turned it into a joke and laughed it off," she says. “You need the human element in any relationship, for it to thrive, but if the relationship becomes too familiar, a line of decorum gets crossed." There is a difference between being friendly and being friends, she adds.
While with clients and vendors, it’s always a good idea to be friendly, when it comes to investors, it can also work against you, says Rahul Vishwakarma, co-founder and CEO of Mate Labs, Bengaluru, an artificial intelligence-training startup. His experience has taught him to be wary of being too friendly with an investor.
“An investor is an opportunist by definition and they will look to get the most out of you, their investment, which might not be beneficial to the startup," says Vishwakarma. What helps are boundaries of respect. “You don’t need to meet in person, there needs to be a mutual trust and respect. Work to create an honest and a two-way conversation where you can discuss pressing issues, seek advice and share your winnings."
Informal business engagements are largely a good thing, if balanced well, says Venture Catalysts’ Sharma. “This consciousness that it’s a business relationship should be constantly present rather than be there as an afterthought." After all, the relationship’s purpose is growth of both parties, and trust and transparency between them.