Ask HN: Being stubborn with investors

[ghobbins]

First time startup, needing advice.

A big part of the experience has been dealing with the volume and variety of advice we get - when to act, when to ignore, when to placate.

Well, an angel investor who has promised (terms written etc) to lead and anchor a seed round for us is asking us to fundamentally change our product and has said that unless we do it, he doesn't want to get involved anymore.

To summarize as briefly as possible: We make private social networks and the investor wants us to limit who can create a group because he thinks it's too risky to allow any user to make a group (in case they make an offensive/inappropriate group). We think that there are ways to address that risk without limiting who can make a group. We have a flagging/moderation tools for the customer, standard social networking TOS that indemnifies the company and customer for any content a user makes, a usage policy developed with the customer, and all users use their real names. This is standard practice with Yammer and other competitors. Limiting who can create a group does not stop anyone from posting inflammatory content as post, event, or comment. Limiting who creates a group creates an unnecessary barrier for users. We have confirmed this with current customers.

The investor either does not understand or sees something we don't because this is not enough for him. He insists we're wrong and believes it's a "no brainer."

Is he right? How do handle this situation? We want (need) him involved but perhaps he does not share our vision? Or perhaps we need to be more flexible with our vision?

[wdaher]

This investor sounds like they're going to be a hassle to deal with throughout the life of your company, so you may be better off without him. It's one thing to offer your advice as an investor, and another to threaten to pull out because of it.

I think you should always consider his viewpoint, but ultimately the decision needs to rest with you. You (should) know your customers better than anyone else.

[symfrog]

You should take money from investors that trust you to make the right decisions. Ultimately you are responsible for the success of the company. Decisions should be made with the customer as your priority and not the opinions of any investors or advisors.

[Geekette]

"We want (need) him involved but perhaps he does not share our vision? Or perhaps we need to be more flexible with our vision?"

Do you "need" him or his money? I can understand needing money but cannot understand needing someone who does not know your field/customers better than you, yet wants to force a significant product change. Which = someone who does not respect/have confidence in you. If you've got traction, find other investors; locally, get your AngelList game on, etc.

Likewise, being flexible with the path to your vision shouldn't be confused with changing your vision on a whim (someone else's for that matter).

[vpatil_amt]

I would use a cliche: be yourself. As in be how you would be with any business partner. Be polite. Be open to suggestions and critic. But just as you would not cut an unfair deal with another business partner: do not cut an unfair deal with an investor.

Investors unlikely like pushovers. Also there is shortage of great investment opportunities: especially in growth capital stage. So if you have got there (1-5 mn+ revenue) you are in a sweet spot.

[bernatfp]

If you really want him on board, then agree to this change. I don't think this makes your vision change that much.

And maybe letting you choose who can create a group will also rise the quality of the groups. However, I agree with you that adding this mechanism won't help much in offensive content prevention, but it can put some users away if they can't create a group right away.

[ghobbins → bernatfp]

Unfortunately from our view, it changes the vision a lot.

Our networks are built for universities and a big way we differentiate from other solutions (in which only chartered organizations can make a group) is we allow informal groups (study groups, interest groups, topic discussions, etc) on the system.

Based on our beta, a large percentage of groups are informal and would not be chartered by the university. Yammer does not limit who can create a group, for that reason we are more wary of them as competition.

[bernatfp → ghobbins]

Oh, I hadn't got the part in which these small networks depend on a superset (ie university), I thought you were validating people yourselves.

In this case this change entails a higher leap. Then, consider talking again in how different is his proposition from what you want to achieve, and how better it is for him (as an investor who wants his investment to succeed) to go your way, not his way. Well, I assume you've already done that, but do it again. You should win him to your side or skip him.

[argonaut → bernatfp]

This is really bad advice, I think. Technically it's true - if you want him on board you probably do need to make the change. But the fact is that this is the kind of investor you want to run away from.

[bernatfp → argonaut]

You're right, but it doesn't look like running away is an option. OP emphasizes that they need him, and is specifically asking for help on how to handle this.

[redtexture]

The investor has told you he doesn't want to invest in your idea.

That's a "no".

Time to move on to your next investor prospects.

[argonaut]

> Or perhaps we need to be more flexible with our vision?

Famous last words, I think. This strikes me as a gigantic red flag. If an investor is willing to pull out over something as simple as this, what do you think will happen when your company is actually struggling and needs help?

[jtfrench]

"unless we do it, he doesn't want to get involved anymore." >>> From first-hand experience, this is the warning sign. Does this sound like the start of a good relationship to you? Are you ready to ride this out for years?

[petervandijck]

1. He's wrong.

2. Even if he was right, you should still RUN AWAY. If your investor wants to run your business, he's not an investor you want.