This happens. Occasionally you and your investors/VC won’t see eye to eye or worse yet, you’re sideways with your VC and the relationship is acrimonious or hostile. While I’ve never had a hostile relationship with a founder, certainly there are times where we’ve been in disagreement on major issues or a founder isn’t happy with us for one reason or another. Here’s what we’ve found can improve the relationship and get things back on track:
Cool off. If the relationship with you and an investor is deteriorating, take some time off from each other. This may be a few days or a few weeks. Communicate to the investor that you’d like to take some time off from each other and get a date on the calendar to revisit in person or on the phone to revisit issues. Time heals and generally when you do sync back up, cooler heads prevail.
Go one-on-one. If you’ve been having disagreements with a particular board member during board meetings, get the person to talk to you one-on-one with no one else present. In a board meeting with others present, an investor/VC will feel the need to assert themselves in front of others. Egos are at their highest in front of peers. Having a one-on-one conversation will at least remove that need for self assertion in front of peers and allow you to make progress towards a solution.
Use a go-between. If one of your investors/VC is having major issues but others are not, ask one of the other level-headed investors/VC to reach out to the hostile party one-on-one, and then report back to you. This is classic back-channeling. Generally that conversation may uncover the root of the problem, what the person really wants, the way to a solution, etc. Ask the go-between to then set up a call/meeting with all three of you so that the go-between can act as mediator.
Offer a buy-out. If it’s an option, offer to buy the hostile party out, then spend some time seeking out potential buyers or ask another board member to help here. The buy-out should be at a price that is at least a return of capital if possible. If you cant find a buyer for the shares, so be it, but generally this will get you a few weeks of distance from the hostile investor. Those few weeks may be very helpful in allowing everyone to cool down and get the conversation back on track.
If all of the above fail, ask your attorney two things: i) how can you remove this person if they’re a board member; and ii) can this person do anything to make your life truly difficult (sue, block certain actions, call shareholder meetings, etc). Understanding your downside and what the hostile investor can do is important. The one thing I would say you absolutely shouldn’t do is go silent on the hostile party. Always communicate even if it’s uncomfortable – silence causes the investor to imagine the worst possible outcome materializing. Good luck.
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