The economic downturn might be easing up — but founder-investor relations haven’t taken a turn for the better yet. According to a new Sifted survey conducted this month, 71% of startup founders feel like their relationships with their investors have gotten worse, not better.
Nearly 44% of respondents said that their relationship with their VCs has gotten worse in the last 12 months, while 27% said it had gotten much worse, according to the survey of 96 founders and senior startup leaders of mostly early-stage companies.
That’s even a downtrend from last year, when Sifted polled 49 founders and senior startup leaders and found that over half of them felt their relationship with investors was getting worse.
What’s more, 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.
Here’s what else we learnt this time around.
Profitability is still the priority
VCs are still beating the drum of profitability: 84% of respondents said they were under more pressure to prioritise profitability or revenue compared to a year ago (when about 86% said the same).
“There’s still a lot of BS around how we should aim to be global leaders, move fast, talk to customers, listen to a million fractional snake oil salesmen — but at the same time, cut costs, run lean, focus on niches,” one respondent wrote. “It’s like you’ve been reading a book about going on a new adventure with a band of heroes, which is suddenly ending in a Dostoyevsky-styled survival novel that reflects on sanity.”
Investors have been encouraging layoffs and cutting back on new hires
In the past 12 months, VCs have continued to encourage portfolio companies to cut costs (nearly 66% of respondents said they’d been given this advice), with the vast majority having recommended layoffs (87%), as well as cutting back on new hires (70%).
Companies have mostly followed that advice, with 64% reporting cutting back on new hires and 57% trimming headcount and/or staff costs; 49% have also made savings on office costs.
Unfortunately, VCs haven’t been particularly helpful during this tough time.
When asked how helpful VCs had been with things like go-to-market strategy, customer contacts and marketing on a scale of one (least helpful) to five (most helpful), nearly 44% rated them a one. One respondent described VCs as “totally inconsistent and lacking on responsibility.”
On personal issues — such as founder mental health and C-suite personal development — investors were deemed even less helpful, with 64% of respondents rating them a one.
Nearly 87% of respondents said that the topic of founder mental health had never been discussed in board meetings.
That’s particularly concerning in light of another recent Sifted survey that found 45% of founders reported their mental health was ‘bad’ or ‘very bad’ right now.
VCs are having a negative impact on founder mental health
The strained VC-founder relationship tension has been weighing on founder mental health: 76% of respondents said their investors have had a negative impact on their mental health over the past 12 months.
“They are adding extra pressure in an already stressful environment,” wrote one respondent, while another said they were affected by “blame culture and bullying behaviour”.
Another added some advice for other founders: “Your family and health come first, if the investors you have don’t ask, tell them you need help.”
Others advised their fellow founders to think hard about whether they need to raise venture capital — or could find alternatives.
Founders want more help with fundraising and customer connections
Several respondents said they’d like more help with fundraising or finding new investors; less micromanaging; and industry connections and customers.
One respondent wrote that they would appreciate “real help and less judgement from people who have never built a thing”.
“Bring in genuine experts or get out of the way!” wrote another.
One entrepreneur said they would like VCs “to remember founders are human beings, that a pre-seed company can’t have the same amount of stuff figured out as a Series D company, and that the ‘growth at all costs otherwise you’re an idiot’ turning into ‘profitability at all costs otherwise you’re an idiot’ takes a little longer to turn into a reality than it takes them to change their mind on Twitter (sorry, X).”
A couple of respondents had more fundamental requests of their investors: to provide more “empathy” and “humanity”.
Not all founders are going through a rough patch with their investors, however: 29% said their relationship with investors had gotten better or much better in the past 12 months.
“Some of our investors have been amazing and others haven’t,” one respondent wrote, while another noted “our investors have been very supportive.”
One founder said their investors are all angels — in both senses of the word. “They are extremely positive and focused on problem solving as well as encouraging me where they see I’m trying as hard as I can. It’s my biggest advice to all new founders, choose investors you can call with really bad news, knowing it won’t make things worse.”
