Be an Early Bird and Get the Best Deal!

Be an Early Bird and Get the Best Deal!

Mastering Investor Relations: Dos & Don’ts for Founders

Investor Relationships

Every entrepreneur is looking for ways to boost their startup growth. Different people will give different answers, yet one surefire way to achieve growth is build investor relationships.

A startup can secure funding and receive validation by building investor relationships. Furthermore, they can help the founders learn valuable lessons to set them up for the competitive business world.

But how can founders build such relationships? This blog will help startup founders understand the dos and don’ts of startup-investor relationships.

What are investor relationships, and why does it matter for founders?

Startup investor relationship refers to the connection between the founders and investors. Often, it could also be between a founder and potential investors. Building investor relationships is essential for startups to keep existing investors in the loop regarding startup operations and learn from them. For potential investors, it builds a valuable bond and shares information to gain their trust for possible startup funding. Furthermore, investor relationships can help you create a credible brand image and find reliable partners and potential investors by leveraging their network.

So, whether you are raising seed funding, venture capital, or IPO, you must maintain good investor relations (IR) for startup growth. But how exactly do you maintain the investor relationships? Well, understanding a few dos and don’ts will make building investor relations easy.

The Dos of Startup-Investor Relationships

The following are a few things you need to do to maintain a good relationship with existing and potential investors, whether you are in the early stages or are a publicly listed startup.

  • Set clear expectations for funds and performance.

To create a trustable bond between the founder and investor is to make achievable promises. Realistic goals with consistent efforts and performance
help you win the trust of the investor and help you attract more investors for future funding. While it is easy to make ambitious promises, a lack of
performance can lead to doubts and investor pressure. This is especially true when you raise seed funding from angel investors as they take a huge risk by investing in seed-stage or early-stage startups by first-time entrepreneurs, considering that only 18% can achieve success.

  • Maintain clear and regular communication.

Keeping the investors in the loop is essential for the smooth operation of the startup. Most investors feel secure about their investment when they receive consistent information regarding the startup’s performance, challenges, and key successes. Whether dealing with private investors or the public (IPO shares), you must provide detailed reports and emails for transparent growth. Private investors like angel investors or venture capital firms, set up regular in-person meetings.

  • Prioritize networking with investors.

To raise funding, you need to focus on pitching to investors. However, your job doesn’t end there; it’s just the beginning. You must find investors and build a credible bond. Investor networking can help you get market validation, leading to secure partnerships or other investors. So, the founders should attend global networking events like the Global Startup Summit or some niche-specific networking and pitching events to find investors.

  • Showcase your vision and determination.

More often than not, if your pitch is solid, the investors will approach you with the desire to know more about your startup. You must showcase your vision and action plan to them to secure a pitching opportunity. Therefore, you can update them about some milestones your startup has achieved or about the development in operations and more.

  • Be open to feedback and suggestions.

A founder should understand that investor communication is a two-way street. Meaning you are bound to hear back from the investor. It can be praise, criticism, feedback, or suggestions. You need to be open to those who value the investor’s insights when they have expertise in the field. For example, the insights of angel investors and venture capital firms are crucial for early-stage startups‘ growth.

The Don’ts of Startup-Investor Relationships

Maintaining investor relations is critical, and it’s common to make mistakes. Following are a few don’t to maintain a great bond with investors:

  • Overpromising growth rate and performance

Ambitious promises alone will not carry your startup to higher positions. Thus, promising an overestimated growth rate and performance metrics can be fatal for your startup. Failing to achieve your goals by a significant margin or without any massive roadblock damages your image and makes it difficult to secure future funding.

  • Not maintaining clear communication

Keeping your investors in the dark will lead your startup in the same spot. Therefore, you shouldn’t remain silent with the investors. Regularly update them about the startup operations and achievement of goals. Whether you face a setback or win an important contract, you must update the investors to show accountability and professionalism.

  • Neglecting the investor’s deal obligations

Failing to meet agreed-upon obligations, such as reporting requirements or equity structures, can lead to mistrust and legal issues. So, cross-check all the papers and meet the obligatory needs to avoid any unnecessary legal actions.

  • Being too defensive

Constructive criticism or suggestions are part of healthy startup-investor relationships, especially with venture capital firms. So, being too defensive
about your decision can lead to missing out on an opportunity or losing the investor’s trust. Use their criticism to improve and take it personally.

  • Depending on one investor

Relying solely on one investor increases your vulnerability. It can increase the chances of massive disagreement and endanger the future of your startup. So, diversify your investor base to reduce risks and gain access to varied expertise and resources.

Conclusion

Building good investor relationships is the key to startup growth, as the investors provide financial support, guidance, and credibility. However, building investor relationships is easier said than done. Therefore, we discussed some dos and don’ts of creating good startup investor relationships. A founder must set clear performance expectations, maintain communication, leverage networking events, and use feedback to attract and retain their investor’s trust. Avoid overpromising, neglecting legal obligations, lack of communication, and taking feedback as personal criticism for startup success. Leverage startup events like 21BY72’s Global Startup Summit for investor networking to avoid reliance on single investors.

FAQs

1. What is the meaning of investor relations?

Investor relations refer to the ongoing relationship management between a company and its existing or potential investors. Investors need consistent
updates to ensure that their investments are being utilized properly. Therefore, the startups must provide the investors with regular updates on performance, market trends, and plans through reports, emails, or in-person meetings. A strong investor relationship helps startups tackle problems and get the necessary guidance from investors.

2. What should founders do to develop good investor relationships?

Founders can create good investor relationships by focusing on transparency, regular communication, and mutual respect. Set clear expectations about how funds will be utilized and provide consistent updates on progress and challenges. Be receptive to feedback, as many investors bring valuable expertise. Actively network to strengthen connections and avoid overpromising or neglecting agreed-upon obligations. These steps ensure trust and collaboration, helping founders secure financial and strategic support for their startup’s growth.

3. What are the benefits of building investor relationships?

Building strong investor relationships offers several benefits, including access to funding, mentorship, and a broader network of industry connections.
Investors with domain expertise can provide strategic guidance and open doors to growth opportunities. A solid relationship enhances a startup’s credibility, making it more attractive for future funding rounds. Moreover, trusted investors act as advocates, increasing the startup’s reputation in the market. Healthy investor relationships are integral to navigating challenges and sustaining long-term success.

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