Are you at the point where you are thinking about how to share information with investors?
Knowing how best to share information with investors can cause entrepreneurs a real headache. After all, the product designs, patents, and marketing materials you have developed are priceless resources for your business.
While you may be ethical, some people are not.
By gaining access to these materials, they may use your own business ideas against you in some capacity. Furthermore, how you share these materials with potential investors carries a security risk. Even when you do want to share the information, how can you do this safely?
In this article, I’m going to explore how to share information with investors in a way that protects your business and yet helps potential investors understand more about the entrepreneurial opportunity you’re offering.
Due Diligence is Essential
Whether you’re an investor or a start-up founder, you should be entering into a reliable and robust form of due diligence. This process allows you to ensure, as best as possible, that the parties you are negotiating with are being forthright and honest about their capabilities. When thinking about how to share information with investors the due diligence is the part where everything falls into place around sharing info.
It also protects you and your business from risks associated with new potential partners and their business operations.
During the due diligence process, you may be asked to share one of the following with a potential investor, with each being key to sharing proprietary information:
- Business model and any business plans you have developed
- Personal business track record
- Financial details such as profit and burn rate
- Team reputation
- Detailed information about owned assets
- Contractual obligations
- Current and future risk/liabilities your business faces
- Insurance agreements
- Revenue streams and your supply chain information
- The debt and share structure of your business
- Trademarks and patents, both existing and pending
- Your market research data
- Details about exactly how your product/service works
When taking all these points into consideration, sharing all this information with an investor does carry some risk that this information could fall into the wrong hands. Throughout the pitching process, you will be sharing much of this information with several investors. Each time you do this, the risk of your information being accessed or misused increases.
For this reason, robust and safe procedures must be carried out to share any proprietary information about your business with investors with confidence. However, my recommendation is to avoid putting confidentiality agreements for just sharing exploratory documents such as the pitch deck.
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.
Remember to unlock the pitch deck template that is being used by founders around the world to raise millions below.
ACCESS THE PITCH DECK TEMPLATE
Sharing Proprietary Information Securely
When you are thinking about how to share information with investors keep in mind that the best way currently to share proprietary information with an investor, is to do so digitally. In the past, handing out or sending sensitive information physically meant this could be easily copied or could fall into the wrong hands. The 21st century equivalent of this is being hacked.
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