The C-Sweet Spot

Entrepreneurs are constantly performing a tightrope walk between unwavering belief and crippling self-doubt. One way that they can help keep their balance is to partner with an investor.

However, investors come in all shapes and sizes, each with their own unique approach. Some shower entrepreneurs with unhesitating loyalty bordering on blind faith, which can often lead to reckless exuberance while others are relentlessly critical and negative, which tends to cast a permanent shadow leading to anxiety, uncertainty, and paralysis. The majority tend to fall somewhere in between.

So, what qualities define the ideal investor type, the one who is most likely to be able to help entrepreneurs succeed? And what does any of this have to do with C-words, a children’s fairy tale, Aristotle, and a 12th century Rabbi?

Getting Organised

In over 15 years of working in private equity and venture capital, I’ve thought a lot about investor types. I’ve attended hundreds of board meetings and had many more thousands of interactions with investors in settings both official and informal. The vast majority of these have been enjoyable, educational, and enriching experiences. But some were most certainly not. I saw how various personality types and behaviours played out in different circumstances, how their impacts were felt by the business leaders at the sharp end and, ultimately, how the companies’ fortunes were shaped by them.

From this exposure and experience, I’ve come to realise that there’s a spectrum on which each investor type is found. Notice I’m referring to ‘investor types’ rather than ‘investors. This is intentional as I believe that almost all investors demonstrate behaviours that epitomise more than one ‘investor type’. Now there are some investors who are relatively one-dimensional - I’ve encountered a small number - but these tend to constitute the minority. The rest of us try our best to be multi-dimensional, shifting our mindset and approach depending on the circumstances.

The Eight Cs

“The Seven Cs” would obviously have been better, but I’m trying desperately to keep the pun count down

Over the years, I’ve witnessed Eight Investor Types or personas operating at Board Meetings or represented on cap tables that all happen to begin with the letter “C” - fancy that!

They are:

1. The Chum
2. The Cheerleader
3. The Confidant
4. The Counsellor
5. The Coach
6. The Challenger
7. The Contrarian
8. The Cynic?

The four outer investor types (1, 2, 7, and 8) are those who end up doing most harm that entrepreneurs should avoid. The first two think because they think you’re always right and the last two because they think you’re always wrong.?The magic lies in the Inner Four.

The Golden Mean and Goldilocks

I first heard about The Golden Mean when learning about Maimonides, the great 12th century philosopher, physician, and Rabbi. This was one of the ideas that he drew from Aristotle, who taught that the middle ground between two extremes was virtuous and worthy of focus. This concept applies beautifully to the world of investors. There's a spectrum to navigate, avoiding the pitfalls of the outer edges and seeking the valuable traits that reside in the sweet spot. Just as Goldilocks famously discovered during her illicit porridge pursuit, the middle is often just right.

Here's the Outer Four and why they are problematic:

The Chum: This investor offers unwavering loyalty but little strategic value. Their presence dilutes the board's ability to have critical and fruitful discussions.

Action - Cut them loose.

The Cheerleader: Enthusiasm is fantastic, but blind positivity can mask underlying problems. Cheerleaders rarely push for improvement.

Action - Keep them on the side-lines.

The Contrarian This investor argues for the sake of arguing. They disrupt progress with negativity that offers little constructive value.

Action - Challenge them

The Cynic The cynic also embodies negativity but, worse than the Contrarian, they tend to ascribe nefarious motives to others which breeds an atmosphere of distrust and hostility.

Action - Limit their influence.

In the heart of the spectrum lies the Inner Four or Golden Quadrant, that represent the investor types and behaviours that will be most useful as you build your company:

The Confidant (Your Trusted Advisor): This investor isn't just a financial backer; they become a pillar of support, a sounding board for your ideas and a source of strategic guidance. You can trust them with your vulnerabilities and aspirations.

The Counsellor (The Mastermind Strategist): Experience is a powerful asset, and a good counsel brings a wealth of knowledge to the table. They offer insightful advice on both long-term vision and the tactical execution needed to achieve it.

The Coach (The Accountability Champion): They believe in your ability to excel and hold you accountable for achieving your goals. The Coach helps you develop a roadmap for success and celebrates your milestones along the way.

The Challenger (The Voice of Reason): A good challenger isn't afraid to ask tough questions and poke holes in your assumptions, though always with an eye towards helping you sharpen your vision and execution. This healthy scepticism helps you refine your plans and avoid costly mistakes.

The Synergy of Support: How These "C"s Work Together

As I’ve said, in an ideal world, the Inner Four don’t necessarily represent different people but rather four complementary traits that can hopefully be found in one person. These four traits combine beautifully to create an investor who actively supports your growth that can foster trust, allowing for open communication and idea generation, offer strategic guidance, ensuring your vision translates into actionable plans. They will keep you on track, holding you accountable and celebrating wins while challenging you robustly but always in the spirit of partnership and truth seeking - ensuring that the company comes first.

By seeking investors who embody this Synergy of the "C"s, you create a powerful support system for your company. These individuals won't just provide capital; they'll become invested in your success, offering invaluable guidance and constructive support throughout your entrepreneurial journey.

I’d love to hear whether investors and entrepreneurs agree with me or have a wildly different take. I’d be especially keen to see whether entrepreneurs recognise the behaviours and approaches that I’ve talked about (some awesome ones tagged below).

Matt Taylor Danny Mayer Gavin McCloskey ???? Michael Mayer Alex Matisse Chris Allen Harry Keen Zack Kanter Hugh Thomas First Sukpaiboon Aron Gelbard Jamie McCloskey Josip Cesic Matija Kopi? Avin Rabheru MBE Alex Hersham Jon Kraines Nic Crossick Ryan Figlia Emma Sinclair MBE Nick Hussey Amir Reuveny Sara Cullen Nick Taylor Peter Marler Josh Guttman Kareem Aly Damian Soong Maxwell Luthy Luke Montgomery-Smith Harriet Scriven Avrom Gilbert Zach Ware