If you’re running a startup company or you’re simply at the stage where you need investors, you know that this can be a stressful part of building your business. Dealing with investors requires a lot of time and energy. Here are some tips for dealing with investors for any project that needs financing.
When you’re working with investors, you need to show them that your business or idea is worth their money. This isn’t always an easy task, and it takes a lot of interpersonal communication skill to ensure that you find investors who will work with you effectively.
Remember that the investors you talk to have likely sat through hundreds or thousands of pitches. They know what they like and what they don’t. They’ve likely heard the same ideas over and over again. On top of this, investors are real people willing to help your company soar. Give the investor something new, and make sure you tailor your pitch specifically to them.
Managing investors
Managing your investors isn’t as difficult as it may seem at first. Yes, it takes some skill and knowledge, but it doesn’t have to be hard. Learn some effective ways to get, maintain, and manage your investors.
Be passionate
One of the biggest things potential investors are looking for is a passion for your business or idea. If you’re not willing to put everything you have and are into this, why should someone else front the money? You need to make an investor know without a doubt that you’re putting your all into this. Don’t come to potential investors with a partially-developed idea. You’ll just waste their time and yours. Make sure that you’re passionate about your project before you approach anyone for money.
Have conversations
Being able to have an in-depth conversation about the industry, your idea, and everything surrounding it is an important aspect of managing investors. To get investors in the first place, you need to be able to talk with people about the subject. To keep your investors, you need to be able to communicate what is going on with the business, how it is developing, and more. Keeping your investors engaged will help ensure that they stay on board with your project.
Provide options
When you’re working with investors, one of the quickest ways to make them lose interest is to give them an all-or-nothing scenario. You need to give them options, allowing them to choose how to invest in your company in a way that is beneficial to both parties. If you don’t give your investor options, they’re more likely to simply walk away from the deal. In some cases, an investor may simply state that they are willing to put up a certain amount of money, and that’s that. Consider your options in this case, thinking through how you see the business unfolding with this person as one of your investors.
Stop trying to sell
Once you have an agreement from an investor, it’s time to stop selling. Back off a little, and don’t push the business in your investor’s face every time you see them. When someone chooses to invest in you, they are excited about the opportunity, but they don’t need to hear you trying to sell it to them every time you’re in contact. Build the relationship as you need, but leave the sales pitches for potential investors rather than those who have already committed.
Keep majority stock
In some cases, your investors may request a percentage of the stock or partial ownership of the business. While this isn’t a bad thing, and is actually quite common, it can leave you in a bad spot if you’re not paying attention. You should be the majority stockholder for your new business. Don’t give away too much of what you are building just because someone is investing in the company. Keep track of the stock or business percentages you’re giving out, and make sure that at the end of the day, you’re still in charge.
Offer easy access to documentation
Throughout the life of your relationship with your investors, you’re going to need to provide them with a variety of documentation. From the very first pitch, when you give your potential investors your business plan, all the way through running the business, paperwork and documentation have to be shared. Find an easy way to share any documents your investors need, whether that’s through a courier service or online through an option like SharePoint.
Keep in mind that much of the documentation you’ll be presenting to your investors is private information for the business. You don’t want these papers to be shared around. There are several secure ways to share documents online now, and this may be the quickest and most effective option for ensuring your paperwork goes only where it needs to go.
Offer regular updates
While you should be in regular contact with your investors, you may find that, on occasion, it’s been a while since you last spoke with one. Offer your investors regular updates to keep them in the loop about what is happening. Updates can include changes to the company, news-related information, or just a brief overview of how the company is growing.
Make sure that if there are ever any legal issues or competitive problems, you bring these to your investors right away. They should be made aware of any lawsuits filed by or against your company, as well as any other potentially problematic actions being taken.
Specify communication channels
It’s probably not a great idea for your investors to be contacting everyone at the company to get their input on how the business is being run. While this sounds like a great way to open the lines of communication in theory, in practice, it just muddles everything and can lead to huge problems with the investor, the business, and your employees.
Instead, make sure that your investors know who they have open communication with. This point of contact in the company will likely be yourself, but you may also decide to designate one or two others who are integral to the company to work with investors. Ensure that the investors have easy access to their contacts so that they never have to search out other avenues of communication.
Give good and bad news in a timely manner
When managing investors, you need to make sure that you’re not trying to keep them from hearing if things aren’t going well. They likely know the bumps in the road of your business far better than you do, especially if they’ve been investing or working in the industry for very long. Nothing ever goes perfectly well all the time, and your investors know that there are going to be problems to overcome. Let them know right away when things aren’t going well.
However, no investor only wants to hear the bad. They want to celebrate with you when things are going great, too. Did you find a new employee who has completely changed the face of how you interact with customers? Reach out to your investors and let them know the good news. When things are going well, you don’t want to forget those who helped you get where you are.
Give priority where priority is due
You may find yourself needing to schedule meetings with investors, offer up information one at a time, or thanking your investors in a public or private setting. All of these situations require you to give priority where it is due. You don’t want to upset your most valued investors by ignoring them or making them feel less valuable than others. Make sure that you know where each investor lies in your list of priorities.
Keep in mind that priority doesn’t necessarily equal the number of dollars given in investment. You may find that there are some investors who are crucial and invaluable to your business even though they haven’t invested as much as others. Pay attention to all of your investors and ensure that you prioritize them in the way that works best for you and your company.
Dealing with investors isn’t always an easy prospect. On top of building your business, you need to manage investors, keep everyone happy, and ensure that the company is making a profit. This can be a juggling act, but in the long run, it is well worth the effort.
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As an expert in startup management and investor relations, I bring a wealth of firsthand experience and knowledge to the table. Having successfully navigated the intricate landscape of startups and securing investments, I've honed my skills in dealing with investors effectively. My expertise extends to various facets, including crafting compelling pitches, managing investor relationships, and implementing strategies to ensure sustained financial support.
Crafting a Compelling Pitch: When dealing with investors, the importance of a well-crafted pitch cannot be overstated. Investors have encountered countless proposals, making it imperative to stand out. I emphasize the need for entrepreneurs to showcase genuine passion for their business or idea. This isn't just about presenting a concept; it's about conveying a deep commitment that convinces investors to trust their resources.
Managing Investors Effectively: Managing investors is a nuanced skill that requires a delicate balance of communication and strategic decision-making. I stress the significance of maintaining open and in-depth conversations with investors. This not only helps in securing initial investments but also in keeping investors engaged throughout the lifecycle of the business.
Offering Options and Maintaining Control: To retain investor interest, providing options for investment is crucial. I advocate for entrepreneurs to avoid presenting all-or-nothing scenarios, as flexibility encourages investor commitment. Additionally, I advise on the importance of retaining majority stock to ensure that founders maintain control of their business despite attracting external funding.
Documentation and Communication: Efficient communication involves providing easy access to documentation. From the initial business plan to ongoing operational details, I recommend secure methods such as online platforms to share sensitive information with investors. Regular updates play a vital role, not only in keeping investors informed but also in addressing any legal or competitive challenges promptly.
Prioritizing Investor Relations: Acknowledging the varying levels of investment, I emphasize the need to prioritize investor relations based on their significance to the business. This involves maintaining clear communication channels and promptly sharing both good and bad news. Investors appreciate transparency and timely updates on the company's progress.
In conclusion, the art of dealing with investors extends beyond the initial pitch. It encompasses ongoing relationship management, strategic decision-making, and effective communication. By implementing these tips, entrepreneurs can navigate the complexities of investor relations and foster long-term, mutually beneficial partnerships.
