Investors can Stick it Wherever24 Jul 2015
Over the past two weeks Laia and I binge-watched the Netflix series, Unbreakable Kimmy Schmidt. Created by Tina Fey, the show follows the semi-surreal themes of 30 Rock and features a strong female lead who starts off with a big disadvantage (she was trapped for 15 years in an underground bunker by a crazy apocalyptic reverend) but escapes to take on the world and doesn’t need help from anyone to succeed and be happy.
I laughed out loud at one scene in particular when Kimmy’s employer, a ridiculously wealthy and out-of-touch Manhattan socialite (played by Jane Krakowski) is in the middle of a divorce from her private equity billionaire husband, Julian Voorhees. The wife is reviewing her legal options with her divorce lawyer who tells her she can’t get around the prenup:
Lawyer: Sorry, but this prenup is pretty ironclad.
Lawyer: The good news is you never violated the infidelity clause.
Mrs. Voorhees: But Julian did!
Lawyer: Unfortunately, it only pertained to you.
Lawyer: Pursuant to the codicil, paragraph three, Mr. Voorhees retained the right to (looks up legal language)… “stick it wherever.”
Lawyer: At the end of the day, the financial settlement is what it is.
This legal lockdown made me think of the contract that startups enter into with their investors. On the one hand, the startup commits fully to the relationship, putting their heart and soul on the line for the companionship – and dollars – offered by their new partner. The investor meanwhile retains the right to play the field and, if the relationship starts to fall apart, can ditch in favor of the younger, sexier options.
Now, I’m not trying to say that investors are all rich, lecherous tyrants who only stay with their investments while the going is good. I just think it’s important that startups understand the terms of the deal and the relationship they’re entering in to. You are getting married to your investor and, while you must remain faithful, the investor will take take other lovers.
Like a good marriage, the best investments last a lifetime and reap great rewards for both the parties in the relationship. But if things go south, make sure you have a better lawyer than Mrs. Voorhees!