Startup investors like to claim that they add value to their portfolio companies. It’s a way to differentiate yourself from other investors.
In reality, I think that there are two types of great startups. The first are indeed those that become great as a result of an investor’s involvement. They’re already good companies, but the investor is able to share some key experiences, provide some key insights, or make some key connections which help take the company to the next level. The investor helps take the company from good to great, and thereby does indeed add value.
However, there are also companies that are great from the start. They don’t need anything other than money from an investor in order to succeed. In fact, it’s best if the investor just watches the company perform without getting involved. Attempts to add value by the investor are likely to unnecessarily take the entrepreneur’s time at best or confuse them at worst. As a result, it’s best if the investor doesn’t try to add value.
I really like the latter type of company. It’s not because I’m lazy, but because watching such companies perform is fascinating. The vision, crisp execution, market appetite, and the team’s resulting confidence and relentlessness in the face of challenges, it’s all amazing.
Recognizing that you can’t add value to a company is a humbling experience. It’s disappointing at first because you want to help out to feel meaningful. But the disappointment eventually gives way to a liberating feeling as you recognize just how fortunate you are to be along for the ride.
Also published on Medium.