When not to take investor advice
One often overlooked skill for VC-backed founders is learning to discern good advice from bad.
Unlike in the US, many European VCs haven’t been operators before, so the advice they give doesn’t always come from direct experience. Though this is starting to change — with more investors stepping into operator roles to gain hands-on experience, some with the intention to return to VC later — founders tell me that investors who haven’t built companies themselves often give misguided advice.
A Sifted survey from 2024 showed investors of all backgrounds aren’t always helpful to founders. Nearly half (44%) of the respondents said their investors were not helpful when it came to business strategy, and nearly two thirds (64%) said their investors were not helpful when it came to personal issues.
With this in mind, I asked founders: How do you figure out what advice to take on from investors? And how can you manage the potential fallout of not taking their advice?
“The craziest piece of advice that we got was: ‘Why don’t you just raise your prices?,’” says Claire Gusko, founder of sustainable packing company One.five.“This doesn’t sound outlandish at first but given we were active in the food/fast-moving consumer goods segment with extremely price and margin sensitive business customers, this piece of advice just went to show how little the investor in question knew about the market and its operational and pricing-related dynamics.”
Gusko flipped the question back to the investor: "How did you justify price increases with retail customers before?" They couldn’t provide any strategies for doing so without losing customers, she says.
“Asking investors to follow-up their demands with examples of real-life successes or challenges, either their own or from a portfolio company they follow closely, usually helps to distinguish good advice from the bad,” adds Gusko.
VCs will sometimes give advice to push a company’s growth — but that’s not always in the best interest of the company.
Mariam Ahmed, founder of AI-powered data analytics platform Menza, says in the summer of 2023 she was advised to raise a chunky seed round shortly after raising a pre-seed, to capitalise on the boom in AI funding and secure a high valuation.
“We chose not to,” she says. “At that point, we didn’t need that much runway, hadn’t validated our product and didn’t want to be saddled with expectations that didn’t match our stage. Raising prematurely, especially at inflated valuations, can backfire. Looking back, we’re very glad we waited.”
And even though the investors didn’t initially agree with Ahmed, she says they respected her decision.
“I would advise founders not to be afraid to push back,” adds Ahmed. “Founders need to have confidence in their decisions and that they are ultimately making the best choice for their company. Investors should respect that and if they aren’t willing to hear you out then that’s a major red flag.”
Gusko agrees: “We found that the right investors aren't expecting us to be obedient; if the partnership is entered at eye-level, then challenging their advice shouldn't surprise them,” she says.
Of course, taking time to explain your reasons behind a decision and ideally providing data to back up your argument is helpful. “One way to do this would be to record customer conversations so they can hear it ‘straight from the horse's mouth’. Good investors expect you to build a great company, not win a popularity contest. Be prepared to agree to disagree with some investors and trust your conviction about the right way forward for your business. You'll be proven wrong plenty of times, but that's a part of the journey,” she adds.
All that said, Ahmed says she has heard plenty of stories about founders “feeling pressured or even punished” for pushing back on their investors.“That’s why I’m a big advocate of raising on SAFEs (Simple Agreements for Future Equity) or structures that protect founder autonomy early on. It gives you space to make sound decisions without fear of fallout.”
So how can founders decide what advice to take — and what to ignore?
Christian Schiller, founder of Cirplus, a marketplace for circular plastics, says: “First, operate from the notion that ‘nobody knows anything about the future.’ People have fancy titles (partner, VP, director) and certainly have brains, but the fact is no one knows what the future will actually look like. Once you realise this, you can and should take any investor advice as yet another well-informed/poorly-informed opinion’.”
He adds: “Do your due diligence on the prospective investors. More than their brains, it’s the kind of people they are and the values they represent as a fund that you must be comfortable dealing with for the next 10+ years.”
Susanne König, cofounder of energy storage system Kraftblock, stresses the importance of bouncing advice off your broader leadership team to weigh up pros and cons. She also recommends early-stage companies join accelerator programmes specific to their industry to grow their network and find mentors. “If people are interested in what you’re doing, they usually want to help — even if they don’t always get reimbursed,” she says.
Ultimately, a lot of the decision around investor advice comes down to trusting your intuition.
“Treat advice like data points, not gospel,” Ahmed says. “No one knows your company, customers or context better than you do. Trust your gut, stay close to the problem you’re solving and make sure your legal and financial structures protect your decision-making power.”
Fellow founders, especially those just a few steps ahead, can be invaluable in sense-checking investor advice, Ahmed adds. “But most importantly, stay close to your customers. Their feedback will always be more valuable than the smartest VC’s advice.”
—Miriam
\On the subject of… navigating investor advice
💼 What is a SAFE — and how do you raise one? SAFEs are a legal contract allowing investors to purchase equity in a startup at a future date. Equity management platform Carta breaks down what founders need to consider before they issue one.
🤔 Take all advice with a grain of salt. Founder-turned-VC Peter Livingston spent a lot of time listening to investor advice that he says ended up being a huge waste of time. “Looking back, I wish I had spent that time just trying things, building, and engaging with customers,” he writes on Medium.
🏛️ One from the Sifted archives: How to build a great startup board.
.png?upscale=true&width=560&upscale=true&name=Section%20Heading%20(14).png)
-1.png?upscale=true&width=640&upscale=true&name=Section%20Heading%20(21)-1.png)
.png?upscale=true&width=1080&upscale=true&name=START%20UP%20EUROPE%20(2).png)
.png?upscale=true&width=540&upscale=true&name=Section%20Heading%20(8).png)
%20(1).png?upscale=true&height=66&upscale=true&name=Thank%20you%20100K%20followers%20(1200%20x%201200%20px)%20(1).png){kind=small}