Key Relationships, One Outlet Only

Soon after kick-off, founders often ask us: the existing shareholders — should I go and tell each of them myself?

Our position first. They should be told, but not by you, one at a time. Coordinating key relationships means every party hears the same version at the same time. A full mandate has six dimensions — Trust, Information, Narrative, Tempo, Relationships, Accountability — and Relationships comes fifth, and is the easiest to drop. It has no milestone of its own in the sixty days, yet it runs through all eight. Why? Two layers.

When relationships multiply, the wording is the first thing to go

A company that enters the tempo of a raise suddenly has more relationships: investors, existing shareholders, strategic parties. Each has its own ask, its own timetable, its own version of what it heard. Feelings are not the first thing to go. Information is.

So we close it out: investors, existing shareholders and strategic parties are all handled by us. One outlet means every party hears the same version. Every promise is recorded by someone, every swing of feeling is caught by someone, rather than fermenting separately in several channels. Does the founder still need to appear? Yes. This sounds like administration. It is really the second half of the narrative.

Existing shareholders are the cheapest link in the chain

Why single out the existing shareholders? Because only they have a position at stake. When any third party praises the company, the listener discounts it first — there is no telling interest from favour. When someone who has already invested says something good, the listener knows he is answering for his own book. So our job is to organise what the existing shareholders say, not to invent a story for the founder.

The reverse holds too. A deal where the existing shareholders do not stand up is a hard raise. If the people who know the company best say nothing, why would a new investor believe he sees more than they do? There is one exception: shareholder and founder have already fallen out. By then the problem to solve is no longer the raise.

There is another sum worth doing. In an information vacuum an existing shareholder does not stay quiet. He explains it to himself, tells the founder he is unhappy, even goes and asks other shareholders. A misunderstanding grows into an incident behind your back. One proactive conversation takes a dozen minutes. Cleaning up one incident starts at two weeks, with a stretch in the middle where nobody dares to quote a price. In other words, what you save and what you pay are two orders of magnitude apart. That ruler works well.

Handled centrally, not walled off

The company keeps the final say. The founder still sees whoever he should see and still builds whatever ties he should build. What we coordinate is the execution layer: who needs what information at which stage, which existing shareholder cares about which clause, which strategic party's ask conflicts with this round. These moves are small, continuous and easy to drop, so one team carries them through from end to end. Does anyone ever feel blocked? Occasionally. But what gets blocked is noise, not people. Closing out is not shutting the door.

And the firms that did not come in? They are relationships too. A round usually closes with three to five, but the dozens you met will show up again in the next round, in an acquisition, in a reference check. Some will say the skill is negotiating the best price. True, but not the whole truth — treating the ones who did not come in as sunk cost trades a one-off gain on price for a network that would have worked for years. That is a trade we do not make.

The value of a relationship sits in time. A closing ends and the relationship does not reset to zero: the existing shareholders are the endorsement for the next round, and the investors remember every promise met along the way. As far as we can see, the hard part is not making relationships. It is being willing to maintain one when you want nothing from it. That stretch pays nothing immediately, so it is the first thing a busy week squeezes out.

We take that stretch seriously. If it suits, after the next closing it is worth going back through the list of existing shareholders. Just read it. Not to ask for anything.

(For the six dimensions as stated, see "Full-mandate collaboration" in the Archive.)