If you’re running a fast-growing startup it’s very likely that you’re funded with external money and therefore have investors you need to report to. This article should give you an overview on how to manage your investors successfully.
Your relationship already starts before you say yes
You should be very careful with the selection of your investor and not just say yes to the first best offer. Having investors on board is very similar to being married – you go through the good, the bad and the ugly and only get rid of each other if a) you get fired or b) your company goes bankrupt. Both scenarios are probably not what you’re looking for.
But where and how do you find good investors? There are two aspects: first of all, make sure that, besides the money, they also bring additional benefits to the table. For example: you are running a b2b startup that sells to enterprise customers. In that case, you’re looking for investors that also have a broad network of enterprise executives in your area and ideally also b2b sales experience. A good investor can not only open doors but also provide you with the right feedback on how to sell better and faster. Ask the person that can a) support you with the most value and b) has the time to join your board.
Now you might ask: but where do I find these investors that add value to my business? Do your homework and search LinkedIn up and down. Reach out cold to the potential investors, and ask them for their input and expertise. Eventually they will be interested in investing in your company or support you with their network and open doors for you. Doing cold outreach is uncomfortable but it will benefit you in so many ways – so just do it!
Especially in Switzerland, seed investors usually ask for too many shares and offer too little money. In a healthy seed round, you offer 20-25% of your shares, not more than that. An additional tip: Make sure to do your reference checks and ask previous or active founders the investors have invested in for their feedback. This is a must-do due diligence check.
Spice up your monthly reporting with a specific ask
I suggest that you send your investors a monthly reporting. Not only because this will discipline you and your team and will establish a certain level of professionalism, but also because every reporting is a chance to put your investors to work for you.
At the beginning of each reporting put a specific ask: e.g. you’re looking for a new chief marketing officer and need some intros or recommendations. Put it there and ask your investors to support you on this. You will be surprised by how much their network can actually help you.
To manage the monthly reporting you can either create a powerpoint and excel sheet or use cloud tools like Visible (https://visible.vc/). Always deliver the reporting on time, ideally even 1-2 days earlier than planned but never late. Don’t forget to proof-read it several times or let someone from your team do this if you’re not good at spotting the little details (I am terrible at this).
Investor relations 2.0
Your monthly reporting is not enough to establish a good founder//investor relationship. Something I haven’t paid enough attention to is the regular in-person exchange with all investors. Host a dinner or go for some drinks every 4-6 months and invite all of your investors (they might even pay for their own drinks) to facilitate this personal exchange and strengthen your relationship.
This, combined with the regular specific asks, are crucial parts of building trust and having an honest and open exchange. This way, you will not only set yourself apart from 90% of other startups, but you will also leverage your investors’ networks and know-how the best way you can. In return, this will push you and your company to new heights of success.
How do you manage your investors? Do you have any additional recommendations? Feel free to let me know in the comments.