The Importance of Investor Relations for Startups
5 min read time
Getting investors to work with your startup is just the beginning of the entrepreneur/investor relationship. Even though you’ve worked harder than you dreamed possible to secure the necessary funding for your operation, there’s no time to rest on your laurels. Investors release funds right away and they expect their money to be put to good use as soon as possible. When the investment funding rounds end, it’s time to deliver what you promised in your pitch. Investors expect updates on the progress you’re making, so be sure to keep them in the loop.
Improve Investor Relations by Giving Investors the Information They Want to Know
Investors want to see a lot of things, but they don’t want to see you lose their money. They have a vested interest in the development and progress of your business.
Entrepreneurs should know that investors are looking for business owners who are organized, responsible and transparent. Think about the three Cs when giving them updates — be clear, concise and consistent.
Give them your most important numbers first. They’ll be looking for key performance indicators, which are also known as KPIs. Offer at least three to five metrics related to profitability, progress and customer engagement. Impress them with sales numbers for new customers, large sales and repeat customers.
Let them know if you’re ready to add new products or services to your lineup, or whether you have new ideas in the research or production stages.
Don’t forget to update them about other facets of the business. Get them excited about bringing on talented employees, new marketing strategies, media releases and other exciting changes.
Don’t Avoid Contact With Investors When Progress Is Slow
What if your news isn’t that great? Contact your investors anyway, and let them know. Investors may be inclined to get more involved when problems creep up or things are slow. Use this as an opportunity to keep them engaged. Take advantage of their knowledge and expertise. Heed their guidance and support early on. Don’t wait until things spiral out of control to ask for help. Remember this isn’t their first rodeo — they’ve had many businesses succeed already. Many of them have likely had many ups and downs. They’re bound to know how to get things moving back in the right direction. Let them mentor you through the bad times.
As CEO of your own company, you — investors know — are the person with the most insight about the company. Investors that receive few or no updates will be turned off quickly. They may even assume the worst and wonder if your business is failing.
How to Keep Investor Relations Strong
The key to keeping investor relations strong is to communicate with investors. There are many ways to communicate. The method doesn’t really matter unless the investors specifically ask you to communicate with them in a certain way and at certain intervals.
Pick up the phone and call them. If they don’t answer, leave a message or send them a text. Send an email or catch them for a few minutes on an online chat platform. Invite them to sit in on upcoming meetings or to be a guest at one of your events.
Start a monthly newsletter and add them to your email list to keep them informed of the latest happenings. Guide them toward a section of your website where they know they can check for updates on the company whenever they get the time.
Make a template where you can easily plug in numbers for quarterly and annual reports. Remember to keep your reports short, relevant and honest. Never hide bad news, which will break down the trust in the relationship.
Investors will be relying on you to follow through on the plans you discussed. When plans aren’t working out and you need to change strategies, let your investors know. They may be in agreement that you need to change strategies, and if so, you’ll want them onboard with what that looks like. If you neglect to tell them that you changed strategies and the new plans also fail to work out, your investors may feel betrayed. A breakdown in the relationship at any point will likely result in the loss of future funding.
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