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Managing Shareholders

Advice needed: Two sets of investors. Both have exit guarantees. The math works that if the company invests "big" in growth the investor A sees great increases in valuation and exit proceeds. The other benefits, investor B, more if slow or no growth occurs (no benefit from risking additional growth investments) as their exit remains static unless the growth investment doesn't work and then they lose. How to align these? Could of course sell to a new investor, with an eye to growth. But, may want to keep both at the table, how should I do that? What creative plan could we establish that may have upside/downside protection/opportunity for both investors? How do you reconcile inverse realtionships in investor deals? I appreciate thoughts.

Answers

Mark MacLeod
Title: CFO & Chief Corporate Development Office..
Company: FreshBooks
(CFO & Chief Corporate Development Officer, FreshBooks) |

You've hit on the key word: "alignment". You have investors with completely different paths to success. You need to ensure your investors are aligned with the direction YOU want to take the company in. If that means re-writing the deal you have with one or more with them, then do it. Have the tough conversations now. If you don't then you will really have your hands tied when it comes to building a successful business.

One final note: you have not mentioned who's in control. If it's you, then you can plow ahead and chart your own course. Just do so knowing that if you screw up and need more cash, you may not get it from these investors.

Topic Expert
Phyllis Proffer
Title: Owner, Investor Relations Counselor
Company: The Heights Company, LLC
(Owner, Investor Relations Counselor, The Heights Company, LLC) |

Trying to be all things to all people will not work to your advantage regardless of whether you are seeking private or public equity investors. This is also true when seeking public or private debt financing. The risk is developing a reputation for disappointing investors which is very difficult to overcome while prospecting new investors and/or financing. Be the best company possible and seek investment styles aligned with your investment characteristics.

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