The investor's level of involvement in a startup

The investor's level of involvement in a startup. Before a startup receives investment from an investor, it is very important to discuss with the investor what level of involvement, of immersion in the company's activities, the investor has in mind. In the course of this discussion, both sides should arrive at a shared view, so that later this does not lead to conflict or even to the company shutting down. Personally, by analogy with joint-stock companies, I would divide an investor's level of involvement in a company into three levels. The first is the level of the general meeting, the second is the board of directors, and the third is the management board. The general meeting level implies that the investor will influence the most important, significant issues in the startup's life.

For example, the very existence of the startup or its closure, admitting new shareholders into the company, mergers, acquisitions and so on. In other words, vital issues concerning the very essence of the company. At the board of directors level, what is most often discussed are less critical, but still quite important, issues in the startup's life. For example, lines of business, expansion into certain territories, into one region or another, or deepening operations in an existing country, changes to the business model, changes in approaches to certain business processes and so on. All these issues are discussed at the second level, the board of directors level.

Small companies like startups, of course, don't have a real board of directors, but that is the name I use for this level of decision-making as a convention. And finally, the third and lowest level of decision-making is, let's call it, the management board level. This means taking part in the startup's day-to-day operations. Even if the investor hasn't thought about this, hasn't considered it and doesn't know themselves how deeply they intend to get involved in the startup's life, the founder needs to raise this question themselves, discuss it and put it down on paper so that there are no misunderstandings later.

The investor's degree of involvement in the startup's activities is, of course, linked to the investor's share in the company's authorized capital. The bigger it is, the more rights the investor has. But that is not always the case. There are investors, investment companies and funds that state outright in their strategy that they don't want to get deeply involved in the startup's operations, to be a nanny to the founder, to give minor instructions and so on. Most often they reserve the right to take part in discussing strategic issues. So it doesn't always all depend on the investor's share in the company.