If you really want him on board, then agree to this change. I don't think this makes your vision change that much. And maybe letting you choose who can create a group will also rise the quality of the groups. However, I agree with you that adding this mechanism won't help much in offensive content prevention, but it can put some users away if they can't create a group right away.
This is really bad advice, I think. Technically it's true - if you want him on board you probably do need to make the change. But the fact is that this is the kind of investor you want to run away from.
You're right, but it doesn't look like running away is an option. OP emphasizes that they need him, and is specifically asking for help on how to handle this.