The Right Investor
There are three kinds of investors: those who invest for a profitable exit in the short term, those who invest for dividends and long term share value appreciation, and those who invest for intangible returns such as those achieved by non-profit organisations.
A new for profit start up is more likely to find the first type of investor. And if the founder(s) intend to build the business to sell it and later disengage from it, such investors are best suited. But if the founder(s) are interested in building a business that lasts and be involved with it throughout this journey, the second type of investors are best suited.
This is because shareholders ultimately wield power and the management will have to chart the company's growth strategy as per the investors' interest. But a business aiming to last must have a growth strategy that is based on the market (product and consumers).
When the investor is looking for long term returns (the second type), his goal is aligned with the what's best for the business long term. But when the investor is looking for short term returns (the first type), his goal conflicts with what's best for the business long term.
Now, the management charts their day to day operations, financial plans, hirings, and other such affairs as per the short term goal. A new momentum is built. When the short term goal is achieved and the investor exits with huge profit, the business finds itself in a state of dis array from the market, because consumers only about the value proposition, and value proposition is a long term game.
Even if you decide to realign the business with the market, because of the momentum gathered, the change will disrupt everyday operations of the business, and sometimes can even be suicidal. Whether you realign or not, the value proposition is set to diminish. If you are a passionate founder and product designed who worked for the longevity of the business and massive adoption of the product, this current state of business will break your heart.
For these reasons, the second type of investor is best suited for those founder(s) who is looking long term.