Opinions expressed by Entrepreneur contributors are their very own.
A stable network of investors is indispensable for any entrepreneur. These connections can open doorways and write checks for you whenever you want them essentially the most. In case you get it proper, buyers 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 resembling making a great first impression, nailing your pitch and guaranteeing buyers are the right fit. But there are additionally some hard-learned ideas 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 buyers, and in my present position as a enterprise capitalist with 50+ startup investments — I’ve realized fairly a number of actionable ideas alongside the way in which.
Associated: 5 Tips for Navigating the Entrepreneur/Investor Relationship
1. Attain out to buyers far earlier than you are prepared
Keep away from the everyday rushed technique of pitching investors you’ve got by no means met earlier than on a good timeline. This creates a transactional feeling and offers buyers a straightforward excuse to go.
It’s best to purpose to have interaction buyers on an emotional level, the place they’re left feeling like they’ve recognized you personally from the beginning. To realize this, you need to attain out to potential buyers sooner than standard recommendation suggests, even when your concept feels unpolished. You’ll want to talk that you simply aren’t fundraising, however in search of 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, if you happen to keep persistent in following up, you may get the chance to lastly meet and have a real dialog quite than a high-pressure pitch.
Attempt to make two new connections like this monthly. Over time, this can develop into a big community you’ll be able to faucet into whenever you finally want the money. When that point comes, it will not really feel like a rushed course of both and the chances can be extra favorable.
Throughout my time as Founding father of Vungle, I applied this technique over a number of funding rounds. On one event, I had seven competing time period sheets for our $17 million Collection B financing, and it solely took some textual content messages to get the primary provide.
Associated: 4 Expert Tips on How to Network to Find Investors for Your New Business
2. Do not share excellent news till it is 100% confirmed
When assembly buyers, be aware to solely share numbers you are assured you’ll beat. It’s best to under-promise — and over-deliver.
You will typically discover that some buyers have an uncanny capacity to recall each element from prior conferences. Know that buyers take notes or add their ideas into their buyer relationship administration (CRM) after each assembly.
After I meet entrepreneurs on behalf of my enterprise capital fund at Blue Field 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 conduct, it will probably 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 constructive 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 a giant buyer you did not shut or revenues that solely grew 50% as a substitute of 75% (when ordinarily 50% is spectacular progress).
One other tip: Be upfront in regards to the challenges you are going through and search recommendation from buyers. Later, level to how their recommendation helped overcome obstacles. This strategy will increase the emotional attachment and creates belief.
3. Make new buyers elevate cash for you
Upon getting confirmed buyers in a funding spherical, ask for introductions to not less than three co-investors they advocate. A phrase of warning: Guarantee you have got a transparent verbal or written dedication earlier than seeking introductions. In any other case, you danger potential buyers speaking themselves out of investing because it solely takes one skeptical investor to persuade the others.
As an alternative, you desire a sturdy reference who will champion your deal. Traders will see the chance as de-risked when one other investor they respect has already finished 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 completely different buyers, primarily by piggybacking on that first investor dedication and introductions.
Associated: 7 Ways to Maximize Mentor Relationships in Business
4. Maintain up your finish of the funding
Sadly, some buyers 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 buyers (sure, VCs have their buyers too, often known as LPs).
In case you contemplate that your buyers have to replace their LPs each quarter, you need to respect the significance of sending your investor updates not less than as soon as per quarter, if not month-to-month. Please do not ghost your buyers!
It’s best to all the time present a proper written replace no matter whether or not you are additionally delivering information in individual or nearly. All the time begin every replace with key metrics like income, money stability and money runway. Ideally, that is introduced in an environment friendly format resembling a desk or graphs.
Do not make buyers labor by means of a protracted replace with out addressing headline gadgets first. In any other case, you danger shedding their consideration as they will skim by means of your presentation for this info regardless.
Associated: What Does the Venture Capital Due Diligence Process Look Like? Here Is Your Step-by-Step Guide.
While you make life simple on your buyers, they will respect the way in which you use and can doubtless wish to proceed working with you. That is how “repeat founders” or “serial entrepreneurs” skillfully elevate giant quantities for his or her subsequent enterprise, typically no matter how their final firm carried out.
Traders make selections on an emotional degree and by following these insider ideas, you’ll be able to construct belief and handle investor relations like a professional.