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A stable community of traders is indispensable for any entrepreneur. These connections can open doorways and write checks for you once you want them probably the most. In case you get it proper, traders would possibly even proceed to again you far past your present enterprise. Nonetheless, mastering investor relations is a posh course of.
Certain, there’s analysis that covers fundamentals akin to making a very good first impression, nailing your pitch and guaranteeing traders are the proper match. But there are additionally some hard-learned suggestions that you’ll solely hear from an insider.
Based mostly on my expertise as a founder who’s generated a 200x return for my first traders, and in my present position as a enterprise capitalist with 50+ startup investments — I’ve realized fairly a number of actionable suggestions alongside the way in which.
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1. Attain out to traders far earlier than you are prepared
Keep away from the everyday rushed means of pitching traders you’ve got by no means met earlier than on a good timeline. This creates a transactional feeling and provides traders a simple excuse to move.
You need to purpose to have interaction traders on an emotional stage, the place they’re left feeling like they’ve recognized you personally from the beginning. To realize this, you must attain out to potential traders sooner than typical recommendation suggests, even when your thought feels unpolished. You should definitely talk that you just aren’t fundraising, however looking for to construct a relationship forward of a possible financing.
It might take time to get conferences scheduled as there is no such thing as a urgency. Nonetheless, in case you keep persistent in following up, you may get the chance to lastly meet and have a real dialog somewhat than a high-pressure pitch.
Attempt to make two new connections like this per thirty days. Over time, it will develop into a big community you possibly can faucet into once you ultimately want the money. When that point comes, it will not really feel like a rushed course of both and the chances will probably be extra favorable.
Throughout my time as Founding father of Vungle, I carried out this technique over a number of funding rounds. On one event, I had seven competing time period sheets for our $17 million Sequence B financing, and it solely took some textual content messages to get the primary provide.
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2. Do not share excellent news till it is 100% confirmed
When assembly traders, be aware to solely share numbers you are assured you’ll beat. You need to under-promise — and over-deliver.
You may typically discover that some traders have an uncanny capacity to recall each element from prior conferences. Know that traders take notes or add their ideas into their buyer relationship administration (CRM) after each assembly.
Once I meet entrepreneurs on behalf of my enterprise capital fund at Blue Area Capital, I’ve a log of each main reality a founder has ever shared with me. I sometimes encounter a founder who hypes up their enterprise solely to disappoint down the road. If I discover a repeated sample of this habits, it could actually break my belief within the founder and I will be much less prone to make investments. That is exactly what you wish to keep away from.
It is higher to solely share optimistic information when it is confirmed. Do not set your self up for a state of affairs the place you are pressed to justify what did not materialize, like an enormous buyer you did not shut or revenues that solely grew 50% as an alternative of 75% (when ordinarily 50% is spectacular development).
One other tip: Be upfront concerning the challenges you are going through and search recommendation from traders. Later, level to how their recommendation helped overcome obstacles. This strategy will increase the emotional attachment and creates belief.
3. Make new traders increase cash for you
After getting confirmed traders in a funding spherical, ask for introductions to at the very least three co-investors they suggest. A phrase of warning: Guarantee you may have a transparent verbal or written dedication earlier than looking for introductions. In any other case, you threat potential traders speaking themselves out of investing because it solely takes one skeptical investor to persuade the others.
As an alternative, you need a sturdy reference who will champion your deal. Traders will see the chance as de-risked when one other investor they respect has already performed the due diligence and is 100% dedicated.
I witnessed this first-hand once I got here to Silicon Valley as an immigrant with nearly zero connections within the U.S. I raised a $2 million seed spherical from 30 totally different traders, primarily by piggybacking on that first investor dedication and introductions.
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4. Maintain up your finish of the funding
Sadly, some traders expertise radio silence after investing in an organization. Whereas they wish to give founders area to execute, in addition they want updates for their very own traders (sure, VCs have their traders too, generally known as LPs).
In case you contemplate that your traders have to replace their LPs each quarter, you must respect the significance of sending your investor updates at the very least as soon as per quarter, if not month-to-month. Please do not ghost your traders!
You need to at all times present a proper written replace no matter whether or not you are additionally delivering information in particular person or nearly. At all times begin every replace with key metrics like income, money stability and money runway. Ideally, that is offered in an environment friendly format akin to a desk or graphs.
Do not make traders labor by an extended replace with out addressing headline gadgets first. In any other case, you threat dropping their consideration as they’re going to skim by your presentation for this data regardless.
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If you make life straightforward to your traders, they’re going to respect the way in which you use and can probably wish to proceed working with you. That is how “repeat founders” or “serial entrepreneurs” skillfully increase massive quantities for his or her subsequent enterprise, typically no matter how their final firm carried out.
Traders make selections on an emotional stage and by following these insider suggestions, you possibly can construct belief and handle investor relations like a professional.
