Role of Investors in the Governance of a Start-Up Company

Roleof Investors in the Governance of a Start-Up Company

Roleof Investors in the Governance of a Start-Up Company

Astart-up business faces more challenges and the threat of closingdown than established enterprises. All the stakeholders (includinginvestors) play a critical role in securing the going concern of sucha business. There are three key factors to defend an argument thatinvestors should govern a start-up company rather than the companygoverning them. First, a startup has a lot of uncertainties (Ghosh &ampBhowmick, 2014). This implies that investors should be allowed togovern the start-up in order to develop its strategic plan and givethem a chance to gain confidence in the new venture.

Secondly,investors make the largest financial contribution to a start-upcompany (Calopa, 2014). However, investors will only risk their moneyif they understand the company well and have control in the directionit is going to take. This can only be achieved if investors are givena chance to govern the new company.

Third,investors have in their mind the type of business that they wouldlike to engage in and contribute their resources. To this end,investors should take an active role in governing the affairs of asmall start-up company in order to develop its vision and strategicgoals (Kantabutra &amp Avery, 2010). This gives them an opportunityto ensure that the future of the company reflects the type ofinvestment that is in their mind.

Thebalance should continue shifting as the new company grows. This isbecause investors should relieve their governance roles toexperienced managers as the company grows. In a large company,efficiency is achieved when investors review the progress of thecompany using reports issued by the management, instead of beingdirectly engaged in the governance issues.

References

Calopa,M. (2014). Analysis of financing sources for start-up companies.Management,19, 19-44.

Ghosh,S. &amp Bhowmick, B. (2014). Uncertainties in entrepreneurshipclimate: A study on start-up in India. Socialand Behavioral Science,150, 46-55.

Kantabutra,S. &amp Avery, C. (2010). The power of vision: Statements thatresonate. Journalof Business Strategy,31 (1), 37-45.