How to manage your stakeholder relationships as you grow

Navigating relationships with your shareholders and board members is a crucial part of an entrepreneur’s journey. In the early days, your investors might just be a couple of supportive angels or family, and governance feels informal. But as you raise larger rounds, your investor base and board will expand, bringing more structure and expectations. Handled well, these relationships become a source of strength and guidance. Handled poorly, they can lead to serious conflicts.

In this article, we’ll explain what you need to know to manage your relationships with your shareholders and board members. 

How governance and decision-making evolve over time

When a company is just starting out, decisions are usually quick and entrepreneur-led. But, once professional investors come on board, governance begins to formalize, typically through establishing a board of directors during the Seed or Series A round. 

By later stages, your board may expand to 5-7 members or more, requiring decisions through board votes rather than unilateral entrepreneur choices.

Throughout this growth, you’ll want to pay close attention to reserved matters outlined in your shareholder agreements—specific actions needing special investor or board approval. These will be a driving factor in how decision-making is approached at your company. 

Governance throughout your company lifecycle 

Early-stages 

Governance at this stage is relatively light. If a formal board exists, meetings may be infrequent and casual. Entrepreneurs can make most decisions quickly without seeking approval because early investors usually trust you to iterate and find product-market fit. 

Reserved matters for a seed round, if any, tend to cover only big irreversible decisions (for example, selling the company, issuing new stock, or taking on major debt) and are there to prevent a rogue decision that could harm investors’ interests. Many early investments are done via SAFE or convertible notes, which don’t give investors voting rights until they convert, meaning day-to-day control remains with common shareholders in the beginning.

Managing relationships with early investors is mostly about communication and trust. A wise practice is to send regular update emails (monthly or quarterly) highlighting progress, key metrics, and challenges. By communicating proactively (rather than avoiding them out of fear), you turn investors into allies and mentors.

It’s also important to set expectations at this stage. Talk with your investors about how involved they want to be and how you’d like to use their expertise. Some angels prefer a very hands-off approach, while others might enjoy being a sounding board for you. Setting these expectations early on can ensure that you and your investors stay aligned as you navigate challenges. 

Growth-stages

Governance and decision-making now become far more formal as you move into a Series B+ phase. Expect to have board meetings regularly (often every 6-8 weeks or at least quarterly) with prepared agendas, slide decks of company KPIs, and formal minutes—major strategic decisions usually get deliberated in these meetings. 

You’ll also find that certain actions require explicit board or investor approval per the terms of your Series A/B shareholders’ agreement (“reserved matters”). Examples could include changing the company’s charter or capital structure, raising new financing, making large expenditures or acquisitions, hiring or firing key executives, or entering new lines of business.

As your company grows, investor expectations will shift as well. While early investors were sold on your vision, growth-stage investors are now looking at your ability to execute. They expect to see measurable growth-like revenue growth rates, user acquisition growth, and scalability of the business model. 

One of the ways to maintain healthy relationships with each member of your board or key shareholders in this stage is to cultivate one-on-one relationships. Having periodic casual check-ins with your investor directors can build rapport and trust. It also gives you a chance to sense any concerns early and talk them out so you’re not surprised in the next board meeting. 

Governance in the growth stage can also introduce new challenges, like handling disagreements and balancing differing agendas. As a company leader, you’ll sometimes play the role of mediator to forge a unified direction. Another challenge for entrepreneurs is the mindset change of sharing control. You may occasionally feel frustrated that you “have to ask permission” for things in your company. Try to remember that a good board is there to provide oversight and wisdom from their experiences. 

Late stages

In later stages, you might find new types of investors joining the mix. Board composition in late stage tends to include a mix of company representatives, investors, and independent directors with industry or public company experience. If you’re still running the day-to-day at this stage, you’ll likely be sharing the table with people who have run large businesses or have been on many boards before.

Decision-making at the late stage is highly structured. There may be subcommittees of the board (audit committees, compensation committees, etc.), especially if an IPO is on the horizon. Reserved matters are still in play, although by now, most big decisions automatically involve the board anyway. The key for entrepreneurs is to understand that late-stage investors are typically exit-oriented - they are optimizing for a successful exit (IPO or sale) within a relatively short timeframe. They will be very focused on metrics that public markets or acquirers care about - revenue growth, profitability, efficient operations, market share - and more cautious of quick decisions or experiments that were common in the growth stage.

For entrepreneurs, managing board relationships in the late stage often means truly embracing the role of a mature CEO - or knowing when to transition to another role. If you are staying on as CEO, acknowledge that running a late-stage company is a different job than running a startup. You may need to lean much more on your senior team and act more as a coordinator and communicator to the board. 

Continue to nurture individual relationships and be receptive to the board’s suggestions, which might include making tough decisions that stand in contrast to the ones you would have made when your company was younger. At the same time, don’t lose your early-stage passion—you still carry the company’s vision, and that perspective is invaluable in strategic discussions. The board needs to hear your vision for the long-term, even as they think about the exit, so they can make balanced decisions.

Best practices for healthy shareholder and board relationships

While each stage has its nuances, these guiding principles apply throughout your company’s growth journey. Here are some best practices to foster healthy and effective communication with your investors and board:

• Communicate early, often, and honestly: Give regular updates—don’t hide issues.
• Set expectations and roles upfront: Clarify how you’ll work together and which decisions need investor input.
• Choose your investors wisely: Check references for alignment; an entrepreneur-friendly investor eases the journey, while a misaligned one breeds conflict.
• Leverage your board’s experience: They bring pattern recognition. Listen thoughtfully, but present your data-driven convictions.
• Cultivate relationships outside the boardroom: Informal connections build trust and goodwill. Get to know your board members personally.
• Keep the cap table and governance simple: Avoid too many small investors or complex deal terms—this streamlines decisions and communication.
• Stay compliant and organized: Up-to-date records and financials reassure investors and ease due diligence.

Common challenges and red flags to watch for

Lastly, let’s highlight a few common pitfalls that entrepreneurs should watch out for in shareholder-board relations:

• Overbearing or inexperienced investors: Too much control or micromanagement can derail you—avoid funds with stifling terms.
• Entrepreneur communication breakdown: Hiding bad news or dreading updates erodes trust; keep open channels both ways.
• Misaligned goals or time horizons: Conflicting exit timelines create tension—address disconnects early or seek alternatives.
• Board conflicts left unresolved: Persistent factions stall progress; as CEO, you must facilitate solutions.
• Ignoring investor expertise: Dismissing board concerns entirely is a mistake; investigate or provide data-backed reasons.
• Entrepreneur burnout or unwillingness to scale: The role evolves as the company grows—seek help, delegate, and show you can adapt.

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