Micah Baldwin has a great post on the confusing roles and responsibilities between mentors, advisors and investors. It’s a must read for any entrepreneur (particularly those in accelerators where the roles are often mashed together even more.)
Micah makes the point that even small investment amounts from mentors ($5-$10k) are important. And he’s absolutely right. He uses the word “nominal” in this context, because for anyone investing properly (i.e. they know what they’re doing / they’re accredited), this isn’t a lot of money. But I don’t think there really is such a thing as a nominal investment. Every amount invested is huge.
I once made the horrible mistake of describing one of my investor’s investments as “nominal.” I honestly don’t remember the context of the conversation, but the investor in question was present at the time. He graciously didn’t say anything until later in private. He reminded me that every dollar invested is big; that even a small amount relative to other investors is still important, and in his case was a big decision. Minimizing his participation and its importance was one of my poorer lapses in judgement, one I’ll never repeat again.
Every investor – big or small – has rights (based on the deal terms). Remember that when taking their money.
Every investor can be helpful (in one way or another), but they can also be neutral or worse. Mistreating an investor can lead to all kinds of trouble. That doesn’t mean you should put investors on a pedestal and worship at their feet. But remember that they made a decision to take their money and put it into you as opposed to doing something else with it.
Every investor understands (or better understand!) the risks involved when they invest in startups. They know the odds are good that their money is gone the minute they hand it over. But that doesn’t mean you shouldn’t treat their participation (irrespective of the amount) with a shit ton of seriousness and respect.
Hopefully most of your investors provide additional value beyond capital. Mentors turned investors in particular, can be extremely valuable. Some people are so well connected that getting them to make a commitment (even a small one) to put “skin in the game” can go a long way to getting their help going forward. Without that small investment, it’ll be much harder to get their help.
Financial participation opens up clear and direct paths to ongoing communication, to keep you top-of-mind with investors, and make it possible for you to push them for help.