How to Manage a Difficult Investor

Written by Dave Bailey

Filed under board feedback fundraising


Investor relationships aren't always champagne and ski trips. Learn how to handle challenging board dynamics using relationship design principles.

As your business scales, you'll inevitably face times when board dynamics become challenging. It's not a matter of if but when. Your relationships with certain board members can consume your mental energy, and become a source of distraction and demotivation.

Whether due to differences of opinion, expectations or working styles, the outcome is usually the same: heightened anxiety for the CEO, and an array of debilitating thoughts:

“The board don't trust or respect my decisions.”

“The board have lost faith in me and the business.”

“The board don't add any value –they create extra work.”

The advice frequently given to founders is to “choose your investors carefully, as you’ll be with them a long time.” But this isn’t helpful if they’re already on the board, and things are heading south.

In these cases, what can you do to improve things?

Designing Relationships

relationship design using the INCA model

I developed the concept of 'Relationship Design' to help leaders build intentional, productive and resilient relationships. The key is to have proactive conversations about expectations, and make clear commitments about how difficult situations will be dealt withbefore they arise.

The relationship design process comprises four stages, with the acronym INCA:

  • Identify: Identify tricky scenarios that might happen in the future, e.g. you want to pursue an emerging opportunity that wasn’t budgeted for
  • Negotiate: For each scenario, ask for what you want and listen to what the other person wants e.g. you want leeway to move quickly without getting stuck in analysis paralysis, and they want more regular updates during the initial phase
  • Commit: Make commitments and write them out for reference e.g. you commit to providing a monthly report, and they commit to providing positive challenge and encouragement
  • Accountability: Discuss what happens if these commitments are not met e.g. if we notice a commitment isn’t being followed, we’ll bring it up in a board meeting

Relationship Design conversations can transform your relationships by bringing hidden expectations to the surface and encouraging both parties to take responsibility. Initiating this conversation can be as simple as saying:

  • “I’d like to better understand your expectations and talk through some scenarios I’ve been thinking about. When is a good time?”
  • “Would you be open to discussing opportunities to improve how I run our meetings?”

While my clients embrace this concept when designing relationships that aren’t in trouble, there's a reluctance to have such conversations with certain people. The reason is straightforward:

It's easier to design great relationships before they turn sour

Ninety-five per cent of the time, investors will respond, and the conversation will lead to an improvement. However, when there are tensions in your relationship with an investor, and you find it impossible to get in their calendar, holding this conversation directly may not be viable.

In cases like these, the change must start with you.

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Be the Change

Just as you respond to your investors, they respond to you too. Adjusting how you behave can help shift the dynamic in the right direction. Here’s a useful metaphor from Esther Perel (even if she is speaking about romantic relationships):

If you consistently start to do something different at some point, the other person has to adapt, because it's Ping-Pong: if the ball goes to a different corner, you can't stay standing on the other side, at some point you will move.

Here are seven changes you can make that have the potential to nudge others in the right direction:

1) If you want them to receive feedback, ask for their feedback first

Some of my clients send a quick Google Docs survey to their board members after every meeting to ask what the board is doing well and where it could improve. By actively seeking feedback and acting upon it, your own feedback is more likely to be accepted.

2) If you want them to understand you, try to understand them first

Chris Voss became a master negotiator by dealing with real-life sociopaths who threatened to kill hostages. His secret? If you can play back their viewpoint so accurately that they feel truly heard—even if you disagree with them—they’re more likely to try to understand you:

“The sweetest two words in any negotiation are actually, 'That's right.' Before you convince them to see what you're trying to accomplish, you have to say the things to them that will get them to say, 'That's right.'” 

3) If you want them to add value, clarify what you value first

diagram of 7 ways investors can add value to CEOs

In strained relationships, it's so easy to focus on what you don’t want that sometimes you can't articulate what you do want. If you don't ask for what you want, you’re expecting others to read your mind.

Here are seven ways board members can add value in a given situation, and how to ask for them directly:

  1. Opposing perspectives: "I’d like to hear from someone who holds the opposite point of view. How did you arrive at this perspective?"
  2. Experience: "Has anyone faced a similar situation personally or through a portfolio company? What happened? What would you have done differently?”
  3. Network: “I need to meet people on this list. Please can you check whether you have a direct connection? If not, could you please introduce me to someone who might?”
  4. Data:“This is our baseline. Can you share relevant benchmarks from other potential companies? Do you have any reports on this?”
  5. Approval: “I’d like to proceed with this initiative. Are there any objections?”
  6. Accountability: “I see this as critically important, so I’ll follow up at the next meeting. Will you hold me accountable for this?”
  7. Blindspot checks:“Is there anything missing from my agenda? What do you see as the most important issue we’re facing?”

4) If you want good meeting hygiene, present a meeting hygiene slide first

meeting hygiene guide for board meetings

Anchoring is a cognitive bias where behaviours and decisions are influenced by a reference point. If there are behaviours you see as reasonable and essential for a good board meeting, include them on a slide at the start of the meeting. Here are some things you might include:

  • Arrive on time
  • End on time
  • Read the pre-read
  • Keep your cameras on
  • Read emails in breaks, not in the meeting
  • Don’t hog the mic
  • Agree to park off-agenda items
  • Take breaks every 50 minutes
  • Disagree and commit
  • Complete a 1-min survey at the end

To avoid teaching granny to suck eggs, you might run say something like this:

  • “I know this is obvious stuff, but I want to run through this list quickly just in case there are any objections.”

5) If you want appreciation, show appreciation first

While feedback can have a negative connotation, it can also be positive. In my experience, investor’s egos mean they crave praise—even when they seem incapable of offering it. When investors demonstrate the value you seek (see point 3) and the behaviours you want (see point 4), seize the opportunity to acknowledge them.

Likewise, find ways to praise your team for their work and achievements since the last meeting.

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6) If you want fewer meetings, schedule your next meeting first

At the end of every meeting, make a point of scheduling the next meeting before you wrap up. Having an agreed-upon date for your next meeting is often a better approach than saying, “We’ll be in touch,” which leaves space for meetings to fill.

7) If you want connection, find it in other board members first

If you have a good relationship with one of the other board members, seek their advice offline. Some CEOs select independent board members with this in mind. Talking through the issue and its impact on you with an ally may generate possibilities you haven’t thought of.

Invest in your investor relationships

All long-term relationships have highs and lows, and investor relationships are no different. If you’re currently experiencing a ‘low’, I hope these suggestions can help you improve the situation.

And when the outlook is positive, that’s the ideal time to reset expectations and make commitments for how to handle the next difficult situation, before it happens.


Originally published Jul 25, 2023

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