Conflict in the Angel Investor-Entrepreneur Relationship: Good or Bad for Innovation?

Tuesday, August 8, 2017

Here’s a truism that’s hard to dispute: Conflict is inevitable in work environments. Mix together people with their own agendas, ideas, and opinions, and disagreements will eventually emerge.

One element that’s not so indisputable, however, is if conflict is ever productive. Professor Harry Sapienza’s new research offers a look at that issue. But it offers a twist, exploring how conflict between entrepreneurs and angel investors affects innovation.

As Sapienza explains, you can split work conflicts into two broad categories. “One is interpersonal conflict,” he says, adding that previous research reveals it rarely has any positive influence. “The other is task conflict. Some say it’s positive, as it brings out creativity. It forces people to try and get at the right solutions.”

The latter approach certainly worked for Steve Jobs, who seemed to thrive on task conflict. But it’s one thing for a business icon—or even a regular work team—to disagree. What happens if it takes place between angel investors and entrepreneurs?

According to Sapienza’s research, task conflict actually can have a positive effect on innovation, but only if the angels and entrepreneurs can stay focused on their shared goals. “I use the metaphor of raising a child,” he says. “If both parents agree on where they want to go, disagreements over how to get there may not be harmful. But if they disagree over where they want to go and how to get there, the effects will be negative.”

Sapienza also found another factor that can drive angel-entrepreneur success and innovation. “If one person in the relationship is seen as the authority, he or she can help decisions happen more quickly,” he explains. “But if both parties are relatively equal, task conflict has a more negative effect.”

In short, entrepreneurs and angel investors need to follow some basic workplace rules. “It’s good to have a leader, someone who indicates what and when things should be done,” Sapienza says. “But both parties also need to realize they’re a team with a shared destination—even if they don’t always agree as to the best route on how to get there.”