Do you want more funding?
Are you wondering how to communicate with investors?
Communicating with investors is one of the most important parts of being an entrepreneur, startup founder, and CEO. It is one of the chief roles you are tasked with. One that few, if anyone else can do for you all the time.
It will make all the difference in funding, the terms of investments, survival, growth, the outcomes of an exit, the ability to achieve the mission, and what is possible next. So, how do you do it well?
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The Ultimate Guide To Pitch Decks
Here is the content that we will cover in this post. Let’s get started.
Pre-Startup
The best time to be building your network, connecting with and vetting potential investors is well before your first attempt to do startup fundraising. Even before you really startup.
In this stage, you are reaching out passively. You are networking and learning about them. Seek their advice and feedback. This will help test your business plan, demand for investment, and help you identify any weaknesses or improvements to make before you really announce a round.
Communicating with investors at this stage is much more about building relationships with those who seem like a good fit for your values and mission.
When Raising Capital
Communications are going to turn much more professional and organized when you really move into fundraising mode and have an active round in play.
Even if you have personal relationships with members of angel groups and partners at VC firms, you still need to give them the substance needed for a professional investment. You have to make them look great and smart.
Even if they want to write you a check on the spot, they are going to need your pitch deck and other materials, and show they’ve done their due diligence. It is their responsibility to their capital partners.
When thinking about how to communicate with investors remember to keep up your passion, but back up your pitch with facts and substance. Keep this in mind as you send investor updates throughout your campaign.
After Closing The Round
It’s not over once you get the money in the bank. You may or may not have added a new investor to your board as an active director. Even if they are more passive, things will go a whole lot better with regular communication. Don’t make them feel like that parent or rich uncle who people only call when they want more money.
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People like to help and feel valued. They like to know you are taking care of their money, and haven’t just taken off to retire on the beach in Mexico with their cash. They are also probably pretty busy living their own lives.
So, balance regular investor updates, with the most important facts, changes, and areas in which you could use help, while being mindful of their precious time.
It’s probably best for all the information to be sent out prior to any investor and board meetings. Any time in meetings should be focused on only the items you really must discuss or vote on.
Keep up this communication. You’ll want them to participate in the next startup funding round, or at least make it easy to raise and even introduce you to the best investors at the next level up.
When Things Go Wrong
As with any other business relationship, the best are differentiated by staying in touch and continuing to openly communicate when things are going poorly or below expectations.
When it comes down to how to communicate with investors, anyone can answer the phone when things are great. Only a few aren’t cowering under their desks, with full voicemail boxes when things get rough. Be the exception.
Savvy investors know that not everything will go according to plan. It should be a big red flag if you always say everything is rosy. Experienced entrepreneurs know that most of the days will be tough. Some even say they are all tough days, with nonstop challenges. It is just how you face the problems that matter.
Remember that your investors can be the best positioned to help you with connections, advice, and resources. They can’t help if you don’t communicate transparently.
When Pivoting Your Startup
Hard pivots are not ideal, but they probably happen more often than you think. Soft pivots are incredibly common for early-stage startups. Many go all in, still expecting to explore and figure things out as they go.
Often it turns out those they thought were their customers aren’t those it is resonating with most. In many scenarios, entrepreneurs find out that the market isn’t nearly as big as they expected. It doesn’t have the potential to become a billion-dollar business. In other cases, the market and economic environment can just change on them.
A pivot is not the end of the world. It isn’t ideal, but the outcome can be much better if you just embrace it and move on. The sooner, the better.
Not all investors will be happy about it. Though it will go much better if you’ve been building trust and confidence and the relationship. Some will leave their money with you to even go start something completely different. Just make sure you have the facts and present the move well.
When Planning To Scale & Expand
Once you are at that VC funding level your investors can offer a lot of insight and expertise. Make sure communications at this stage are consultative. They probably have much more experience in this domain than you do. You’ll be bringing in new and different types of investors. Many of whom may have completely different interests and philosophies.
When Contemplating An Exit
Some types of investors will be gunning for an exit from the moment they decide to invest with you. Others may have very different ideas. Each of them can have different opinions about when to sell, for how much, and what the terms should be. This can be a delicate situation.
It can be heartbreaking and frustrating when they are not on board and great opportunities are missed. Be sure you are having these conversations well in advance, and are coming to soft agreements and are aligning expectations so that the exit will go smoothly on your side. It can be hard enough as it is without your own investors fighting you.
After The Exit
This is unlikely to be your last startup and probably one of the most overlooked ways when thinking about how to communicate with investors.
Make sure you keep in touch. You’ve already done the hard work of connecting with and delivering for these investors. They should be ready to throw money at you for whatever you want to do next. That is providing you to stay in touch and keep the relationship alive.
Summary
Remember that storytelling plays a key role in fundraising and you will need capital to scale things up. This is being able to capture the essence of the business in 15 to 20 slides. For a winning deck, take a look at the template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.
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