A win win partnership between investors and employees

 

 

Investors and employees have the same goal, to earn a return for their efforts.  These two groups are dependent on each other. The investor supplies the capital and the employees use it to build the company.

 

This relationship is always under pressure. During tough times investors seek to increase their return by “squeezing” more equity from the company for less money and securing liquidation preferences. During good times the employees try to “bid” one investor against another to get the highest valuation possible. Trust, the most valuable currency in a start-up, is at risk in these scenarios.

 

Most companies that survive will see multiple cycles of good and bad times. With this perspective both investors and employees need to trust that they have treated each other with fairness and created a win win scenario as the company grows and succeeds.