Visit our fundraising overview if you’re looking for best practices to raise money, build your deck, pitch, and negotiate your round and visit our managing your investors - investor update email template for tips on how to structure your investor update emails.
What we’re focusing on here is the importance of building relationships with your investors, and the ongoing management of those relationships.
Yes, your CFO (once you have one) and other key team members may take on a key role in getting your fundraise across the finish line — creating your pitch deck, tuning the financial model, detailing the product roadmap — but you need to own the personal relationships through the process and on an ongoing basis afterwards.
Your investors are not your friends and they are not wiring you money simply because they like you. They’re buying into the vision, leadership, drive, promise and hope that you will successfully navigate your company through the pinholes required to reach IPO, sale or whatever other liquidity event is going to return their fund at exit. And throughout the company building process your investors need continue to believe that you can still deliver on this. Maintaining a healthy relationship with your investors helps to ensure that you can keep their confidence in you.
So what does this mean in terms of day-to-day work for yourself? Invest the time to get to know your investors and what makes them tick, prioritizing the bigger check-writers more than the smaller ones.
- How do they want to stay up to date on company progress and roadblocks?
- Do they prefer email, phone, text, in-person?
- Are they on your board?
- Do they have strong opinions? (Most investors do!)
- Are you soliciting their feedback or are you just posting them on outcomes/results?
Assess the answers to these questions from their perspective and build a plan to manage up effectively. Here’s an example of potential touch points with your investors (but you should asses which of these to employ based on what you hear from your investors):
- Quarterly email to all company insiders, which included all investors
- Monthly email to the board
- Quarterly in-person board meetings with dinner the night before each meeting
- Bi-weekly phone/zoom call with each board member
- Twice annually, calls with smaller institutional minor investors that are not on the board or in significant decision-making roles
Easy enough, right? It is straightforward, but time-consuming and difficult to execute particularly when you have a crushing amount of “urgent” work that always pushes investor suggestions, comments, action items and updates to the bottom of your list. They’ve already signed and wired funds so who cares, right? Wrong.
Make the time, build a process and leverage your team to get it done with regularity. If you want, have a junior team member write the first draft of your investor update to save you time. You will thank yourself when those gloomier storm clouds roll in. You’ll need their support (and/or cash) again in the future. And your investors can, and should be, your loudest megaphones/company evangelists, the best check on your blind spots, and key strategic partners if you’re playing your cards right.
Note: When we say investors are not your friends, we’re not talking about the $10K checks from actual friends and family in your seed round, we’re talking about everyone else, and in particular, the institutional investors that lead rounds.
References
Investor update emailsSign up here to apply for a coaching engagement with Hilltop.