Too Many Investors Spoil The Fun. GroupMe’s Jared Hecht on The Big Syndicate

Startups like to build big syndicates of investors so they can draw on a wide network and range of special skills. But GroupMe’s Jared Hecht thinks having too many backers can make life hell for a startup. After all, would you prefer to focus on managing the business, or run around trying to lock down a dozen signatures and votes for every big decision.

In my experience it’s nearly impossible to keep all investors and advisors involved and up to date. In fact, it’s sometimes more of a burden than it is helpful. You need to spend time building your product, company, hiring, and making sure the gears are grinding, not reporting to and hand-holding all of your investors. Big syndicates are good (and a champagne problem) in that they allow you to pick and choose who you want to keep involved.  Out of our pool of 15-20 GroupMe investors, we probably only kept 3-5 completely up to speed on a regular basis. I think 3-5 really active investors is manageable, and most productive. After that, you hit diminishing returns.

Man, most of the investors, left out in the cold.

Well, not to worry: as Andy Weissman pointed out in the comments to this post, the GroupMe syndicate kept in touch through…wait for it…GroupMe. Now that is eating your own dogfood.