It is inevitable that, during your career as an entrepreneur, you will have to deal with investors. This is the reality of the startup ecosystem. Without the aid that these individuals can provide, many companies would never even get off the ground, let alone become successful. As such, it is imperative that you start thinking about how you will approach investors, and how you will manage your relationships with them. While it is true that this is a delicate topic, it is also incredibly important.
Understand that your relationship with your investors begins long before you ever accept their aid. This is simply because you must be very deliberate and cautious regarding your selection process. Having an investor onboard is much like being married, that is, you go through the good times, the bad times, and the ugly times together; the only way to get rid of each other is to either:
Both scenarios are not ideal when you are starting a company, so it would be in your best interest to avoid them at all costs.
This of course raises the question: How do you find good investors?
There are two aspects that you must take into consideration:
Thus, a good investor will not only open doors for you but will also provide you with the proper feedback on how to effectively, and successfully, run your company. Ideally, an investor should allow you to get the most value out of your business.
So, now that you know what you are looking for, how do you go about finding investors that will add value to your business?
If you do not already have a good network, as is the case of almost everyone who starts their first company, especially so if you just left university, you need to do your homework. LinkedIn is a great resource for this task. Simply search it up and down, and reach out cold to potential investors, requesting input and expertise, though not directly for investment. It is important that you do not jump straight to asking them for money without first establishing a relationship.
By doing this, you will eventually get these potential investors interested in financing your company, or otherwise in supporting you through other means such as referrals or advice.
And while it is true that this cold outreach process can be very uncomfortable, especially so if you have never done something like this before, it nonetheless has the potential to benefit you greatly in the long run. So, go out and get it over with. How you get in touch with potential investors is not the point; it can be a phone call, an email, a private message… what matters is that you take the initiative.
Once you have investors onboard, it is of vital importance that you manage them proactively. Open communication is, as in most things in life, the key to a healthy relationship with your investors.
The one thing you absolutely need to be doing is sending your investor monthly reports that outline, in detail, the progress your company has made in the last month. These monthly reports can help you and your team to work on discipline, as it is a recurring responsibility that you share. In addition, the reports also give you a chance to request things of your investors, such as introductions and favours, among other things, essentially putting them to work for you.
Consider placing these requests at the start of the reports, so that you clearly and directly communicate to your investors that you need their support on a specific task. You will be surprised at how much their network can be of assistance to you. However, the only way to have access to it, is to ask. So don’t be afraid to ask!
Keep in mind that the monthly reports, while incredibly useful, are not enough to maintain your relationship with the investors. While they are a good place to start building a strong connection, you should take things a step further and meet your investors face to face. This can make a huge difference.
To this effect, you will want to host dinners, go out for drinks, or partake in other bonding activities about every four to six months. You can of course do it more often if you wish, but generally you want to meet your investors face to face at least twice per year.
These in-person exchanges can greatly strengthen your relationship with the investors. Never forget that you need to pay attention to them, and you need to be transparent. There is nothing worse for an investor than to put their faith and money in a startup, only to never hear from them for months on end, and then when they finally do hear from them, it is only because they need more of his or her money to avoid going bankrupt. This does not foster trust.
Thus, you need to make your investors a priority. Take the time to build an honest, open relationship with them. By doing this, you will not only set yourself apart from 90% of other startups, but you will leverage your investor’s resources, networks, and knowledge. In return, they will push you and your company to new heights of success, which in turn will help you be more successful in the long run.
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