The wellbeing of a founder is essential to the success of a startup. In response to a growing focus on mental health, we’ve seen a boom in mental health startups and investment. However, today’s world is only putting more pressure on venture capitalists. This begs the question — does the mental health of your VC matter?
While many don’t sympathize with those who seem to sit at the top of the startup food chain, VC wellbeing may matter more than you think. If investors are too exhausted to pay attention to your startup, you’ll soon see the consequences.
Funding has increased, investor rounds are bigger than ever and unicorns seem to be at an all-time high. It looks like a great time to be an investor. The flipside of this success, however, is a strenuous pace, unprecedented workload and impossible amount of time for due diligence.
With the public scrutiny and constant risk management that comes with the life of a venture capitalist, the challenges to mental health are mounting.
What does that mean for startups? Here’s what founders need to know when it comes to the wellbeing of their VC.
Watch Out For Investor Wellbeing
There is an undeniable ripple effect of your investor’s wellbeing on the wellbeing of your company. If investors are in a good place, they’ll have the energy they need to invest in you beyond financial backing. On the other hand, if a VC is burnt out and drowning trying to keep up with due diligence, they won’t be able to provide you with the utmost resources.
What Founders Can Do To Gain Insight Into A VC’s Wellbeing
Ask potential investors how active they are in their portfolio companies and what kind of support they offer. Consider the main concern of your startup and ask investors what solutions they have for that challenge.
It’s critical that founders find out how many boards a VC is sitting on at the moment. If an investor is invited to hundreds of board meetings a month, their involvement in a startup has likely been exhausted.
How To Determine If An Investor Has The Energy To Support You
You have to create a personal connection. By finding mutual interest and establishing a connection, you’ll be better able to determine someone’s capabilities. You don’t have to become friends with your VC, but by finding something in common outside of their investments, you’ll understand more about who they are and what they have to offer.
Don’t Jump Into The First Available Funds
Imagine your investor arrives at your board meeting, but they are so distracted and depleted, they aren’t offering any of their much-needed expertise. Or worse, your investors are so exhausted and overwhelmed, they don’t even make it to the meeting.
If you go with the first funding available and end up with a VC who’s completely overwhelmed, you may not be able to maximize the benefits of what that investor offers. That can mean the difference between a founder’s review of a VC firm being “Late to scheduled meeting and didn’t really pay attention,” versus “I simply couldn’t have gotten to where we are now without them. They give unparalleled levels of hands-on support.”
For many founders, funding is just the tip of the iceberg. At a recent startup-investor matchmaking event, I saw startups looking for far more than money. Founders were saying, “We don’t just want your funding. We want your knowledge, your talent and your customers.”
When you want more than just a silent financial partner, wait before accepting the first available funding.
Be Aware Of Ethical Decision Making
The simple truth is that investors can say or do just one wrong thing and make things infinitely more difficult for founders. Founders care about investor ethics and are deeply affected by these ethical or not-so-ethical decisions. Startup studies show that a VC’s ethical reputation means more to entrepreneurs than value-added services and investment track record.
Unfortunately, if you’re mentally exhausted, it may be more difficult to make ethical decisions. The British Psychological Society reports that people who show signs of burnout make more spontaneous and irrational decisions without considering the consequences. In a role that revolves primarily around managing risk and rational thinking, mental health is key for VCs to make investments and ethical decisions.
The importance of finding a VC who is taking care of their mental wellbeing and making ethical decisions may make a monumental difference to a startup’s founders.
Search Harder If You’re New To Startups
Exhausted investors aren’t looking to take bets on unknown founders and uncertain industries. For those already overwhelmed by their workloads and the pressure to invest funds fast, ditching due diligence and sticking with the startup founders they know may be the easy option.
Sticking with the certainty of founders and products they know saves an investor the time and effort it takes to evaluate something new. However, this means unproven founders will find themselves working harder than ever to find VC support.
One impact of the VC mental health crisis is the challenge to find funding for a new founder or new initiative. If investors aren’t paying enough attention to new founders, they may overlook what could be a successful startup.
The mental health of VCs matters. The domino effect of their decision making affects the entire startup industry and warrants a watchful eye. Startups founders must pay attention to the energy and availability of potential investors. While mental health startups surge, we need to protect the mental health of everyone involved in the industry.