Contribution from Subject Matter Experts (SME), Minimising Risk

Lowering the risk of early-stage investment


We suspect that when you acquire or make a significant investment in an early-stage company, your investment colleagues always consider the risk and suitability of the entrepreneur and those close to them, to take the company to the next stage. You know that the entrepreneur knows their products or services, but you will be asking yourself questions such as:

*Does the entrepreneur have the required management experience and skills to handle the issues in functional areas where they feel less at ease (e.g. manufacturing, supply challenges, customer challenges, channel issues, industrial relations challenges, stakeholder management, marketing, and so on?)
*Do they have the leadership skills to increase headcount and at the same time keep their people motivated and engaged?
Creating a product, idea or concept is one thing; but can they manage the growth and all its implications?
*Is the entrepreneur ready to keep focused on running the business and at the same time relate well to the Board, investors and financiers?
*The reality is that moving from a one-man show or a small tightly-knit team to leading more complex organisations brings serious challenges to entrepreneurs, as no individual knows it all – including the investor.

Consider “stapling” a suitable mentor to the entrepreneurs in the companies in which you invest. You do this to lower your investor risk and to provide critical support during start-up and its challenging growth phase.

Many investors believe they are best placed to take that mentorship role but they have other business to worry about and they need to preserve and further build a strong relationship with the entrepreneur that may get strained if the investor is engaged in day-to-day contacts.

Since investors are commonly seen by the entrepreneur as their “boss”, many entrepreneurs are reluctant to admit to them all their issues and challenges – particularly when such perceptions of inadequacy or lack of skill in the entrepreneur may compromise their relationship with the investor and potentially threaten further investment. Having a mentor that has no vested interest apart from the client’s effective performance, and who possesses broad experience and managerial skill can provide significant value to the enterprise and the investment.

An investor or investment corporation, should consider the cost of the mentor as a very minor consideration. Ultimately, the issues that are important for the investors are:

*the protection of the investment and/or the equity stake
*the management of the growth trajectory
*lowering significantly the risk carried by the investor in the potential that the start-up offers
*lowering the likelihood of a significant mistake
*lowering the cost of such a mistake – whether that be financial, reputational, or another key element of the organisation
If you want to consider the use of a mentor to lower investor risk, please contact us at


With our 4 offices in 4 continents and over 100 mentors (and growing) around the world, we are not far from you. Email us.


Leave a Reply