Meeting with current and prospective investors has been a big part of my life over the last 18 months. I’ve literally had hundreds of meetings and telephone calls promoting the virtues and potential of Flubit and keeping our shareholders in the loop.
If nothing else it’s certainly sharpened my pitch but it’s also given me an intimate understanding of what makes investors tick and what keeps them happy.
Clearly everyone’s different and managing numerous investors with differing personalities, expectations and requirements is a big job and needs to be taken seriously. My role as CEO of Flubit is to keep our investors involved so they feel a part of the business and want to support us with our future plans.
Here are some tips based on my personal experiences.
Keep the lines of communication open
Investors hate being kept in the dark and not being updated and it’s a pretty basic requirement to let them know what’s happening in a business they’ve put their hard earned cash into.
I send a brief update every couple of weeks with a few key highlights and key metrics and then a fuller report on a monthly basis with the financials. A regular flow of information means investors are less likely to drop ad-hoc requests on you which can cause major disruption to the team.
Depending on their background and experience, some of your investors might be extremely analytical and like to pour over the numbers whilst others might be more interested in the bigger picture, the dynamics of the team and potential over the long term.
Make sure you get to know your investors individually so you can tailor your approach and make sure the information you provide is right for them and will answer the questions they are likely to have.
Share the successes and good news
If you’ve had a great week, signed a new deal, been featured in the press or have had a bunch of great customer reviews then share this. The fact that other people are singing your praises or you’ve hit a key metric is a big positive and drip feeding this type of information on an ad-hoc basis will make your investors feel more involved and positive about the business.
More on investors and business:
- Top five reasons why investors don’t invest
- How to seduce a VC
- A journey into the mind of a venture capitalist
Be honest and don’t hide bad news
Always be honest! Investors can spot it mile off if you’re being disingenuous and being liberal with the truth – and it will always come back to bite you at a later date.
Investors don’t like surprises either so don’t try and conceal bad news. It’s going to come out eventually anyway so just get it out of the way. It’s never as bad as you think and being transparent and upfront from the outset will help build trust and ensure a stronger relationship.
Remember that investors are on your side and want to the company to succeed. They know that companies have ups and downs, especially start-ups and they might just be able to help or provide constructive advice.
Success doesn’t happen overnight and investors know that especially when they are investing in a tech/e-commerce start-up.
You obviously need to sell the vision and make it sound attractive but you should also be confident that your projections are achievable. Once the investor is on board ensure that you always try to under promise and over deliver. It’s always better to beat forecasts more often than not, than have to explain why the numbers have been missed each month.
Ask for advice and help
Not all investors want to be actively involved in the businesses they invest in so you need to pick and choose who to approach but for many they would be more than happy to help and be pleased to be asked.
A lot of the time investors have been there and done it and have developed and sold successful businesses from scratch. Use their wealth of knowledge and experience as well as their contacts.
Looking after your investors post fundraising
Here, Bob Taylor reminds startups to not forget to keep investors sweet after they’ve handed over the cash.
I’m amazed how ungrateful some entrepreneurs can be once they have closed their funding round.
The deal closes, they get the money in the bank, start spending it (usually pretty quickly because during the fundraising they built up a backlog of people that need paying), and then…. it all goes quiet.
Six to twelve months later, we start getting emails from frustrated investors asking us if we have heard anything from the said Widget.com.
It’s really very short sighted of an entrepreneur not to take better care of their investors. Almost without exception, all the investors I have come across through our network of investors and family offices have been extremely ‘nice’ people. So it’s not like they are a difficult or awkward group to deal with.
And purely from an administrative perspective, there will always be a need to engage with shareholders and investors because of administering schemes like EIS. Certificates need completing and sending so there is a real opportunity to deliver a ‘pleasurable’ experience for investors. Alternatively the company can mess it up. One company I know got all its EIS forms muddled up and sent them to the wrong place with the wrong information on them. It proved to be an auspicious sign for the investors.
Furthermore, most of our investors have previously had successful entrepreneurial careers. They are worldly wise, well connected and actively keen to help their investee companies if possible. So as a pool of advice and potential connections, investors can be a valuable resource at the disposal of the company.
In one company (on which I sit on the board), the investor group consist of accountants and experienced finance directors, lawyers (can’t help that), manufacturing specialists and experienced retailers. It’s a pretty handy bunch of people.
Finally, and as most serial business angels know, most young companies take twice as long and need twice as much funding as forecast. So it’s highly likely the company will have to approach its existing investors about a follow-on funding round (because they have pre-emption rights).
So, it’s ultimately very short sighted not to have kept all investors sweet along the way. My experience is that investors can live with follow-on funding – they kind of expect it, and are usually keen to avoid the company failing, as well as dilution. But they absolutely hate surprises. So a call out of the blue informing shareholders the company is planning to raise further funds is less likely to be received positively by shareholders than if shareholders had been involved in the decision in the first place.
Even better, if you can make it look to investors that they were involved in the decision to raise more capital, then they will be that much more likely to follow-on with their own money.