Do Non-Founders Make Better Investors? – Tremendous
I’ve never been a founder. This gives me one advantage: I’m never tempted to tell founders what to do.
The Problem Board Member
A while back, I was chatting with a great entrepreneur I know. We’ll call him Hal.
Hal is crushing it. His SaaS company is growing rapidly with incredible cash efficiency.
But Hal had a problem.
His board member, whom we’ll call Jim, was becoming a hindrance.
Jim wasn’t just listening, asking questions, and giving a little advice like a good board member. Jim wanted to tell Hal how to run the company.
Hal politely explained why they don’t do things Jim’s way. But Jim couldn’t let it go.
I wondered, why was Jim acting this way? Why did he think he knew better than Hal?
How Not Being a Founder Helps Me As an Investor
I’ve never founded a startup. And I don’t intend to.
Being a non-founder makes it easier for me to avoid doing what Jim does. I am not tempted to think I know better than the CEO.
How could I possibly know better? I’ve never done his job.
Founders often find it hard to stand on the sidelines. But that’s exactly what investors need to do.
I’m eager to help the founder however I can. But I’m comfortable letting him run the company.
Instead of dictating strategy, I like to ask questions. I want the founder to refine his own thinking, not substitute my judgment for his.
Who’s Better at Investing — Founders or Non-Founders?
There are great investors who have been founders. There are great investors who haven’t.
Michael Moritz was a journalist before he became a VC. Doug Leone was an executive at Sun Microsystems. Bill Gurley was an investment banker.
Maybe the fact that they never founded a company made them more comfortable advising the founder, instead of dictating to him.
On the other hand, there are some amazing founder-turned-investors like Peter Thiel, Marc Andreessen, and Paul Graham.
They have advantages of their own. They can provide better advice to a founder since they’ve been in his position.
Both founders and non-founders can make great investors. Either way, you take your advantage and press it.
Wrap-Up
Hal wound up working things out with Jim.
Hal and the rest of the board explained to Jim that these decisions are Hal’s to make. Jim seemed to accept that.
But I had to wonder, how much of Hal’s time was wasted on this pointless dispute?
I don’t do things like Jim.
I try to help the company along the margins. But mostly, I get out of the way.
And because I’ve never been a founder myself, getting out of the way is a little bit easier.
Great to be back from vacation! I hope you guys are getting some rest this summer too.
See you again on Monday!
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