In the excitement of obtaining initial financing, many founders forget about their investors the second the first check clears. Nonetheless, your investors have a vested interest in your business and expect a return on their contribution of cash, time, expertise, and business connections. As such, keeping them informed can help you cultivate a positive, long-term business relationship. Conversely, keeping them in the dark means sowing the seeds of discontentment.
In short, your investors can be the key to business growth – but keeping them in the loop is critical to establishing a symbiotic business relationship that will see your business through major stages of financing, growth, and development.
48 Hours After Closing
Forging a positive relationship with your investors starts immediately after the deal closes. While it may be tempting to immediately announce your first round of financing, hire new team members, sign a lease, or otherwise plow forward in using your new funds, hold off until the money is in the bank and you have connected with your investors. Jumping the gun before the deal is done may make you appear impulsive and mean losing your investors’ trust before your relationship officially commences.
Once the deal is done, remain focused on your stated goals and intentions and avoid moving too far afield of what you and your investors initially discussed. Doing so will ensure that your investors know you will use their money wisely and for the reasons you initially professed needing it.
Once the check has cleared and you start using your new funds, commit to keeping your investors updated on a regular basis. A healthy practice is to create an email template that will propagate each month or quarter, providing updates on new deals, customers, revenue goals, and key performance indicators.
Sending updates on a monthly or quarterly basis instills confidence in your investors through predictability and spares them the need to ping you for updates. Not to mention, if they receive regular updates, they will know they’ll hear from you – meaning they have little reason to worry or fear that you are not using their investment wisely. It also helps you build stronger bonds with them: Cover all your bases in an email so that when you have an actual conversation or meeting, you can delve deeper on certain points like brainstorming long-term growth goals.
Here are a few items you may consider including in your monthly or quarterly update.
Statement of Appreciation
Your relationship with your investors is a social engagement and as such, start your correspondence by showing your appreciation for their contributions to your business. Before you dive into metrics, highlights, and KPIs, take a moment to express gratitude for connections your investors helped you make, provide introductions to other industry connections, and offer them feedback or assistance.
Commit to long-term business growth beyond the investors’ initial capital contributions by drawing upon their industry knowledge and connections. Ask them to help you connect with other business owners, employment candidates, or partner organizations. Additionally, share your recurring business challenges and ask them to offer their feedback, advice, or assistance.
Do not be afraid to take advantage of your investors’ connections in your industry. Although you do not want to abuse this privilege, keep in mind that if your business fails, your investors will be more likely to help you if you can show that you attempted to make the most of their investment and the opportunities they afforded you.
KPIs and Key Metrics
Your investors will want to know how their investments are performing. Offer solid figures and be transparent in sharing how your business is faring. In this section, discuss your cash flow, revenue goals and benchmarks, and long-term growth goals.
Keep this section short and easy to digest: Use a few bullet points and provide supporting data to show improvement in your metrics.
Highlights and Milestones
Share what is going well in your business, not just financially, but in terms of new opportunities and prospects, team growth, leadership opportunities, and your business’ place in the market. Ideally, these milestones will match the goals you set forth in your initial pitch deck during your fundraising round. If you did not include any, create benchmarks and back them up with data.
In the spirit of being transparent with your investors, don’t just share the positives: Also reveal the challenges your business is facing, any losses you have sustained, and what you hope to improve in the coming month or quarter.
Your investors are not outsiders: They are your business partners. They may be the first to help you when something goes wrong. Sending out updates builds trust with them and lets them in. It also increases the odds that they will help you when you need it. If you keep them in the dark, they will expect the worse, losing confidence in you and your company.
Share what you are looking forward to, such as conferences, plans, goals, and team updates. Additionally, give your investors a forecast of how they may be able to help you in the coming month or quarter.
Stay Organized So That They Do Not Have To.
Archive your correspondence in a separate, shared folder. Your investors are busy people, so they will appreciate having a clear paper trail that saves them from digging through their inboxes to find old messages. In each email you send, include a link to the folder so that they can refer to previous messages as needed.
Informed investors are generally happier investors, and staying organized and proactive will make their jobs far easier. As such, they will be more likely to help you in the future.
Experienced Business Formation Attorneys
Wilson Ratledge assists clients in various aspects of business planning. There are numerous considerations to evaluate before making significant decisions for your business, especially when it comes to pursuing financing and working with investors. Our experienced business law attorneys can discuss your options and help you decide how to manage your business affairs. Contact one of our attorneys today at 919-787-7711.