Investor Talk: How hands-on should an investor be?

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Investors play an important role in the life of any startup. But how involved should they really be in the day-to-day running of their investments? A silent entity who confines interaction to investor updates? Or is it all hands on deck, including investors? Here, Disrupt Africa asks five investors how hands-on they think an investor should be.

Justin Stanford, co-founder and managing director of 4Di Capital:

“I think investors should be there to assist hands-on whenever the need meets with their strengths. A value-adding investor is the best, a silent or passive investor next best, but an investor who gets involved where they can’t truly add value and could even be a net negative is the least desirable. Be realistic about your areas of value-add. I think it’s ideally up to founders to figure out their investors’ strengths and draw upon them in a targeted fashion when needed.

As we invest in the seed stage we are quite hands-on as we have a diverse array of skills, experience and value adds to offer from our team, and it’s typically needed — particularly with first time founders.”

Leticia Browne, investor relations manager at Ghana Angel Investor Network:

“In an environment that lacks the necessary infrastructure to carry out thorough due diligence and a working culture that doesn’t regard corporate governance I believe it is imperative for investors to be hands on.  Not only to protect their investment but to impart knowledge into the next generation of entrepreneurs.”

Permjot Valia, founder of MentorCamp:

“Depends. Most investors don’t add value – they really don’t. People make the mistake of assuming that just because someone has money – that they are smart. Some of the dumbest people I know are very rich – and some of the very smartest people I know – are not financially wealthy (mainly because they are not driven by acquisition of wealth).

If you really know a space and the domain the business is investing in – do get involved – otherwise just stay out of the way of the management team you as an investor have decided to back. The question I always ask companies I have invested in is “if I wasn’t an investor – would you pay me to be a consultant?” if the honest answer is no – that’s your answer. Free advice often turns out to be horribly expensive.”

Bunmi Akinyemiju, chief executive officer of Venture Garden Group:

“Investor involvement typically depends on the stage of the business, maturity of the founders, and other operational requirements. For really young businesses, and where management expertise is lacking, it only makes sense for an investor to be more hands-on. If an investor has operational or business development competencies that the startup will find useful, the entrepreneur should be interested in having such an investor as an active participant in the business.”

Sean Obedih, founder of NewGenAngels:

“Personally I believe in being close to my portfolio but it doesn’t mean that I interfere with their work. The best investors are the ones that give you space to execute on the plan you sold them on. Being helpful shouldn’t be confused with being all over your team’s business.”

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Inspired and excited by the African tech entrepreneurial scene, Gabriella spends her time travelling around the continent to report on the most innovative tech startups, the most active investors, and the latest trends emerging in the ecosystem.

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