Assuming you’re fortunate enough to have investors, one of the things they’ll do is give you advice—both solicited and unsolicited. And since your investors are smart, experienced people, you should listen to everything they have to say, right? Wrong.

Investors are smart, experienced people, so you should listen to everything they have to say, right? Wrong.  Tweet This Quote

It’s impossible to follow all the advice you receive from investors. For one thing, most of the investors are likely to contradict each other, if not themselves. Famed VC Fred Wilson even coined the term “Mentor/Investor Whiplash” to refer to the confusion that this engenders.

What you need is a set of guidelines that help you decide when you should listen to investors. The key to figuring out when you should listen to investors is understanding their comparative advantages and disadvantages relative to your own knowledge.

1. Investors know a lot more than you about the startup process. Listen to their advice on process issues.

Most investors are former entrepreneurs. And even those who aren’t have probably been along for the ride for multiple startups. I personally have founded, invested in, or formally advised over 50 startups. We get pretty good at understanding the startup process and recognizing patterns.

When I give an entrepreneur advice about how to manage a board of directors, or the best way to close a highly desirable job candidate, you can bet there are hundreds of hours of direct experience behind that advice. That’s probably a lot better than what you read off that random post on Hacker News.

2. Investors know infinitely more than you about the fundraising process. Listen to their advice on fundraising issues.

One of my pet peeves is when entrepreneurs refuse to take my fundraising advice. I’ve helped raise dozens of venture rounds, and even more angel rounds. Trust me, I know what I’m doing. Numerous times in the past few years, I’ve seen founder after founder fumble away financings because they tried to get too cute and “optimize” the deal.

When someone offers to fund you, and you can live with the terms, take the damn money.  Tweet This Quote

When someone offers to fund you, and you can live with the terms, take the damn money. Every time I’ve had an entrepreneur who tried to hold out for a better deal because so-and-so said they were really interested, those deals never materialized. Investors lie constantly about their interest, and even when they tell the truth, most entrepreneurs are too optimistic to hear the real message.

If someone’s been making investments for years, and they still have the money to keep making investments, they probably know something about fundraising.

3. You know a lot more about your market than your investors. Take their advice on your specific market with a hefty grain of salt.

While there are a few investors who specialize in a single market (and I’m talking about a real single market, like Marketing Automation, not a fake single market like Big Data, which is actually just a convenient term for a host of emerging markets), most investors play in multiple spaces. As a result, you ought to know more about your market than they do. (If you don’t, that is a very bad sign for both you AND your investors).

You know a lot more about your market than your investors.  Tweet This Quote

If all an investor knows about the market is what they hear (and immediately forget) in your board meetings, he or she isn’t going to be able to offer useful specific advice.

And when an investor sends you an email saying, “Should we be worried about Company X?” or “Should we be talking with Company Y?”, that’s not your cue to launch into a full-scale pivot. That’s just your investor trying to be helpful, and trying to reassure him or herself that the investment in you isn’t about to blow up. Such investors need reassurance, not to be involved in a deep dive.

The next time you meet with investors, whether in a board meeting or otherwise, note the advice they give, and classify each bit of advice into one of the categories above. This ought to help you figure out what to follow up on and what to gently deflect (and hope gets forgotten by the next board meeting).

This article published in 2014. It has been reposted to inspire further conversation.

About the author

Chris Yeh

Chris Yeh

Chris is the VP Marketing for PBworks, partner at Wasabi Ventures, and an avid startup investor and advisor. He is also a co-author of The Alliance and serial tech entrepreneur in Silicon Valley.

  • Teju Ravilochan

    Chris, having personally struggled with this question and having watched our entrepreneurs struggle with it as well, I really appreciate the clarity and simplicity of this framework!

    I’m curious about one thing: when an entrepreneur doesn’t heed your advice, whether that’s for the right reasons (e.g. because they know more about their market) or the wrong reasons (e.g. they don’t listen to you about fundraising or process), what do you do? How do you respond? And how do you deal with this if it becomes a pattern?

    Have you noticed that your successful investments tend to take your advice more or less than your unsuccessful investments? Or is this so contextual that no pattern emerges?

  • Chris Yeh

    The beauty of working with investors is that our memory is so short, we won’t remember! At the end of the day, all we care about is making money on our investments. Deliver the returns, and everyone’s happy.

  • tjahjono

    In my opinion the article is very relevant to young entrepreneurs today. Although, it is common sense to follow the foot steps or the advice of those are more knowledgeable or experienced, people often don’t. I think a lot of times people get so wind-up in their own scenarios and aspirations that they sometimes forget the reality of the condition or situation. The article touches on things that entrepreneurs should probably listen to their investors, and I think it’s true that sometimes we need to rely on our investors and heed to their advice. This, however, does not mean that we have to start being robot and illogically obedient. Take what you lack and what they have in abundance (experience, knowledge, know-how), consider what you know and what they advised you to.

  • Tuan Tran (Toby)

    This article reflects very true when it comes to the ego of entrepreneurs when taking advice of investors. Entrepreneurs tend to reject the idea of critiques or advices of investors give to them because they tend to think that it’s their idea/product, who knows best except themselves. That is so not the case. In fact, investors are the one who can see the gaps and what are wrong with your product/services that you, who are the one make that happen cannot see it directly especially in the finance sections. I totally agree with the 1st guideline which tells you to listen to investors’ advices about startup process because they are an expert of startup. The second guideline just goes back to the finance section that investors tend to think of everything that we as an entrepreneur cannot see it. It is a priceless time if we can spend time and talk to investors about our financial plan. The last guideline will fit into different categories depends on the situations that I’m not sure it would work all the time. This article really telling young entrepreneurs to swallow their egos and taking those damn valuable advices from investors. Thanks so much for sharing this post, Chris!

  • Calvin Theyer

    I think that this is a good article for those who are starting a new business as it explains why we should trust our investors and gain experience as much as possible because they have experienced many ups and down. And I believe that it is always a good thing to learn from others’ wisdom and not becoming too self reliance.

  • Eric F Jacob

    The article gives a great tips for young entrepreneurs who seek help and advice from senior investors to fund their start-up company. However, I believe that often times people don’t really pay attention to details when it comes to getting advised from other people, who most of the time has more direct experiences in the field. In other words, people tend to think with their head, not with common sense. This has created a majorly problem for their success rate in the workforce. I think it is not such a bad idea to actually listen for any advises that will benefit you eventually. Thanks for the post!

  • Siden

    It’s a great article. I agree that people (entrepreneur) who want to get fund for their start-up company should listen to advices from investors. In most cases, we should not listen to everything they say because different people have different situations. We should be aware that sometimes investors have their own background and methods to be success, but other people might have different backgrounds or maybe in different places which they cannot use the same ways as the investors have done to be success.

  • Guest

    Thank you for sharing. I agree with you that if we ask advices from many investors, some of them might be the same and the others will have different thoughts. Depending on what they have gone through, they will have their own advantages and disadvantages which we should observe for our own knowledge. Sometimes failed investors are the ones who teach us very valuable lessons.

  • Guest

    Thank you for sharing. I agree with you that if we ask advices from
    many investors, some of them might be the same and the others will have
    different thoughts. Depending on what they have gone through, they will
    have their own advantages and disadvantages which we should observe for
    our own knowledge.

    Because of that, we should listen smartly to what they advise us and know that we sometimes need to rethink again what we have learn from them. Sometimes failed investors are the ones who teach us
    very valuable lessons.

  • Fc Ngoc Tran

    Thank you for sharing. I personally agree with you that if we ask advices from
    many investors, some of them might be the same and the others will have
    different thoughts. Depending on what they have gone through, they will
    have their own advantages and disadvantages which we should observe for
    our own knowledge. Because of that, we should listen smartly to what they advise us and know that we sometimes need to rethink again what we have learn from them.
    Sometimes failed investors are the ones who teach us very valuable lessons.

  • chi shaolong

    Thank you for sharing. Generally, investor is the third person to listen your story, but sometimes an owner cannot. the main reason is they will evaluate the real value and try to control the risk, however, owner always think the best result not matter the initial planning. other than that, listening is better than speaking, when you listen someone you can get some advices from them even if these advices are right or wrong. but when you speaking without listen, investors will lost their mind. so, i like these three advices, these help me to know how to listen than speaking

  • Andrew Wirawan

    I totally agree with the three guidelines given to truly know when to take the advice from the investors. As a young entrepreneur, I totally understand that most of the time, we rely too much on the advice from our investors, because we think that they are more knowledgable and experienced, but indeed not everything they say would be beneficial for our business. I, especially, agree with the last guidelines that ultimately we have a better understanding of our market than our investors. They could help us to raise capital and solve the startup issues, but designing the product and services, as well as the promotional efforts, should be our main responsibility by answering our customer’s needs and wants. Thanks Chris for the great article.

  • bhojwani

    Thank you for this article! The article is great for
    entrepreneurs who are starting a new business or fundraising for an existing
    business. I agree that entrepreneurs should listen to the advice of their
    investors as investors have a lot of experience. Several entrepreneurs do not
    understand this point. They are too consumed with their own thoughts that they
    ignore the advice from investors.

    I also agree that several entrepreneurs decline the
    financing that they are getting offered in the hopes of better terms for the
    financing in the future. These
    entrepreneurs should realize that it is a lot harder to raise money today than
    it was several years ago. Therefore, they should take advantage of any
    financing opportunity available even if it is not the best.

    I believe that the reason entrepreneurs behave the way they
    behave is because of their attachment for the business. Their business is like
    their baby; so they want the best financing with flexible terms and want to run it as they think is the best.

  • Long Bach

    I found your article informative. Before I read your article, I have always think the investors and founders relationship kind of differently, it may due to my ignorant to this very important information for my potential future plan to open my own company. I have always thought the investors would have a very limited role in a company like “give me the money”, provide information about the potential funding sources, and extend the company connections with other companies like suppliers. It is good to know that they are more helpful than I thought which makes sense to me now.

  • Sharon Lam

    Thank you for this interesting article! Following the investors’ advices might help entrepreneurs to pursue their business goals. However, entrepreneurs should aware with those advice since every investors have different thoughts toward the suggestions that they give. Therefore, the guidelines offered by the author would help entrepreneurs to avoid this confusion and to achieve their business goals.

  • dsukohardjo

    This article is very useful, thanks for sharing with us. Since investors and entrepreneurs are both on different field, their point of view towards things are also different. This article can help students and new graduates to be aware of this, because I used to think that investors know better than entrepreneurs but it turns out to be wrong

  • gallok

    Great article! The best advice of this article is to take the money of somebody who offers to fund you. Starting a new business and being an entrepreneur is not an easy task. Everybody has an opinion or advice to give, even though sometimes they do not have idea of your business or the market. It is very important to listen the right advice from people with experience.

  • Mika Huang

    I love the article. It’s really helpful for people who have startup businesses and try to convince investors to believe their businesses are going to be a success. However it is important to take good advices from invistors in order to understand what may work and what may not.

  • Joey Faustian

    interesting article. In my opinion, it is true that the investor is more experience and know a lot more things than you do, but you definitely cannot follow all the thing they said. Why? its simple, you cannot follow all the things they said because sometimes they’re suggestion is not align with our principle. If by getting the money means that you have to let go your principle, it would be mean that you are not suitable with your investor.

  • cecillia yakub

    Great article! I personally agree that those young entrepreneur should consult with experienced investors if they would like to start-up new businesses. However, the advice from the investors may not be right all the time, thus, the entrepreneurs have to be careful in filtering the investors’ advices and know the right time when they should follow the investors.

  • Utika Chindanon

    Thank you for posting this amazing article. It helps the startup business to understand more how to take the money of someone who offers the funds. This article helps them to convince investors to believe their businesses are going to be a success.

  • Astrawan Prayogo

    Interesting article, it’s amazing how difficult it is for a man to understand something if he’s paid a small fortune not to understand it therefore there people who work as the broker and counselor. There is a quote from The Little Book of Common Sense Investing” by John Bogle. “Get rid of all your helpers. Then our family will again reap 100% of the pie that Corporate America bakes for us”

  • Juhno Mann

    Good advice. Makes sense to listen to those who have more experience than you in certain aspects. Other times i’m sure I will have to make decisions based on my gut feeling. Can’t learn how to be a good decision maker unless you think for yourself and make mistakes.

  • Ray Tedjadinata

    I do agree with the entire article. We have to listen to someone who has had more experiences than us. However, i feel like we do not have to follow all of their advices if we think that we have a better way to do something. I feel like what we have to follow is our feelings insted of listening to others.

  • Chris Yeh

    Even beyond misalignment of principle, it’s rare for investor and entrepreneur to be aligned in terms of interests. Even when an investor is your friend, in his or her role as investor (especially when investing other people’s’ money) he or she has to put the good of the investment ahead of that of the entrepreneur.

  • Adelin Soelaiman

    It is a rather helpful article for those who are going to start own business. It really helps to realize how important the advice of other people, taken from their experience, is. Investors, people who have gone through startup processes know more business details then young entrepreneurs. However it is great that the article turns attention to the fact that a person should listen to inner feelings and intuition as well. First of all, some advice can sometimes contradict with beliefs and principles of the person and, all in all, investors can also be mistaken.

  • Hanna Boyd

    I love that you note the “different field” entrepreneurs and investors are often playing on. It’s tempting to be idealistic when going into an interaction with investors and assume that if YOU want to change the world EVERYONE must want to do the same (especially if they agreed to take the meeting/listen to you pitch, in the first place). Keeping in mind they many have their mind on returns is crucial.

  • aalasow

    I say most of the time we need to hear everyone that is involved in the business especially our investors. After hearing everyone’s input, than decide what is best for the business. I definitely say don’t go about “listening to your gut feelings” but
    only facts and experience. I understand some want to learn thru mistakes, but
    at times one mistake will throw you in a hole that you can’t dig out of.

  • thompsonjm99

    Thank you for posting. I enjoy reading these kinds of articles. I very much agree that we should listen to people who have been through experiences before us. I think that is a great way to learn before we do something so that we avoid as much failure as we can. i also agree that it can be extremly difficult to convince investors to invest in you knew business without very much history. How would you get their attention if you were starting your own business from scratch?

  • Thy Q

    This article is very helpful. I’ve seen a lot of people who are always waiting for a better deal but it never comes along and they lose their opportunity in the end. It makes perfect sense to take the most tolerable and available deal. I believe funding a business is hard because you don’t know if that business is going to do well or not. It takes a lot of trust to put a step forward in unknown territory. I will keep all of these points in mind for future reference.

  • KE7JLM

    Great article. Thanks for the advice. I hope someday I get to use it.

  • Orlin Merritt

    I liked this article because it helped to provide clarity on when entrepreneurs should follow their own instincts, and when they should listen to the advice of investors. I would assume that an un-written principle of entrepreneurship is that you will likely be venturing into an area that has not been previously explored. This is based on the premise that the entrepreneur has found a solution to an existing problem, and intends to create a business around their solution. In a situation like that, who could you seek advice from, if no-one has ever solved that problem before? I think the article did a nice job of methodizing when to accept the advice. For example, Yeh argues that you should trust the advice of others when it comes to process issues, which are problems that experienced investors already know how to solve. It makes sense that you should avoid trying to reinvent the wheel on an already solved problem (e.g. how to fundraise, how to wrangle the startup process), because you could otherwise spend your time on the issues that have not already been solved. Another aspect of the article I thought was interesting was when Yeh addressed the nuances of the social interaction between investors and entrepreneurs. At the end of the article he stated that investors will ask questions of entrepreneurs, simply as an effort to reassure themselves that their investment isn’t about implode. He seemed to highlight the issue that investors don’t necessarily want to get involved in trying to solve the minutiae of specific-market questions; they just want to know that entrepreneurs are aware of them and will address them. In conclusion, if I ever entered into a situation where I was an entrepreneur and I was interacting with investors, I would heed Yeh’s advice and seek to delineate between issues I should trust my own instincts on, and issues I should trust the investors on.

  • Azra Samiee

    I liked the way this article encouraged the entrepreneur to trust their passion and vision but to be open the insight of investors. Their are so many articles and “How To’s” on how to deal and position yourself with investors its nice to read that the relationship should be a balance of power. Entrepreneurs should know their products, should know their market, should know what they want and need from investors but also should be open to the experience and knowledge of investors who have most likely been in the same position as the entrepreuneur at some point and understand the journey.

  • Michael Farrell

    Thank you for writing this article. I hope to have the opportunity to use this information if I am to have a venture funded one day.

    I love how you categorize the different types of advice one may receive and clearly gave a recommendation on course of action. So many people will give extremely vague recommendations on how to proceed in different scenarios. While I understand context is important, I appreciate this article even more as it is a great guide for business owners who may be put between a rock and a hard place.

    The article starts off saying it is impossible to follow all of the advice you receive from investors. While this may be true for some, I feel you must delicately balance the consequences of taking their advice, but also the consequences of going against investor recommendations. Will investors feel insulted or ‘turned against’ if they give you a strong recommendation and you refuse on the basis that they are not specialized in the industry. Will this lead to any ill-will, or possible problems when additional funding is needed?

    Secondly, when and how often is it appropriate to actively seek advice from your investors? I imagine it is dependent on investment size and the relationship you have already fostered, but in your opinion will
    investors take the time to advice on things such as the hiring process or questions on day to day operations? In other words, is it ‘allowed’ to utilize your investors as free small business consultants?

    Lastly, in your second point you say that “When someone offers to fund you, and you can live with the terms, take the damn money.” Aren’t investors very self-interested and wouldn’t you be concerned that you are leaving money on the table by refusing to negotiate?

    Thanks again!