You built the company. You know the customers. You probably understand the product, the history and the people better than anyone.
That’s a huge part of the value.
But at some point, the very things that make you invaluable can start to look like risk to someone thinking about putting serious money into the business.
That can be a little scary. Especially when you’ve spent years being the person who knows everything and can fix almost anything.
They’re evaluating you, too
When investors look at a founder-led company, they’re obviously looking at the numbers, the market and the opportunity. But they’re also trying to figure out: What happens to this company as it gets bigger?
And, maybe more uncomfortably: How much of what’s working right now only works because of the founder?
Questions I’ve experienced from investors:
- Do the important customer relationships belong to the company — or really to the founder?
- Can senior leaders make meaningful decisions without waiting for the founder?
- Is critical knowledge documented and shared, or does most of it live in one person’s head?
- Do key employees understand how the business model actually works — what generates profit and what eats it?
- Does the management team understand the numbers well enough to run their part of the business?
- Can the founder hire people who are better than they are in important functions — and then actually let them lead?
- Can the founder change their own role as the company changes?
That last one can be a tough one. Because the job you were great at when you built the company may not be the job the company needs you to do next.
Scaling isn’t just distributing responsibility. You have to distribute enough understanding of the business that other people can make good decisions when you’re not in the room.
Ask yourself this before an investor does
How coachable am I? How adaptable am I?
Can someone challenge the way I’ve always done something without me immediately explaining why they don’t understand the business? Can I hear that something that worked brilliantly for the first ten years might not work for the next five? Can I bring in someone with more experience than me in an area and actually listen to them? Can I change my mind without feeling like I’ve somehow lost control?
That can be hard. You built the thing. A lot of what you believe about the business came from being right when other people weren’t. That confidence probably helped you get here.
But the question eventually becomes: Can the same person who built this version of the company adapt enough to lead the next version?
An investor isn’t necessarily looking for a founder who does everything right. They’re trying to figure out what happens when something isn’t right. Can this founder hear it? Can they learn? Can they change?
Because if the answer is yes, a lot of other problems are fixable. If the answer is no — yikes. Now the founder really can become the risk.
Being valuable and being necessary are not the same thing
If you disappear for two weeks and the company can’t function, that’s dependence.
If you leave permanently and the company loses your vision, judgment, relationships or leadership — well, of course it does. You’re the founder. You should be valuable.
The issue is when you have to be involved in everything for the company to work.
The part I’d rather say first
If I were preparing to bring outside capital into my company, I’d want to identify my own constraints before an investor identified them for me.
I’m still too involved in these two areas. Here’s what we’re doing about it. And here are the things I’m deliberately staying close to because that’s where I create the most value.
That’s a very different conversation from: “Nobody can do this the way I do.”
Yikes. Because even if that’s true today, what does that mean when the company is twice the size?
I don’t think sophisticated investors expect founders to have no weaknesses. But they do want to know whether the founder can see what the next version of the company requires — including what it requires from them.