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a solid investor network It is indispensable for any entrepreneur. These connections can open doors and write checks when you need them most. If you get it right, investors may even continue to support you well beyond your current venture. However, mastering investor relations is a complex process.
Of course, there are studies that cover the basics, such as making a good first impressionnail your asphalt and ensure that investors are suitable. However, there are some hard-to-learn tips that you only hear about from insiders.
Based on my experience as a founder delivering 200X returns to my first investors, and my current experience as a venture capitalist investing in over 50 startups, I’ve learned a lot of actionable techniques along the way.
related: 5 Tips for Handling Entrepreneur/Investor Relations
1. Contact investors before you’re ready
Avoid the typical rushed process Promote investors You have never met before on a tight schedule. This creates a sense of trading and provides investors with a relaxing excuse.
You should aim to attract investors emotional level, making them feel like they’ve known you from the beginning. To achieve this goal, you should approach potential investors earlier than traditional advice suggests, even if your idea doesn’t feel complete yet. Be sure to make it clear that you are not raising money, but rather seeking to build relationships ahead of potential financing.
Since it is not urgent, scheduling the meeting may take some time. However, if you follow up consistently, you’ll have the opportunity to eventually meet and have a genuine conversation rather than a high-pressure sales pitch.
Try to make two of these new connections each month. Over time, this will develop into a large network that you can tap into when you eventually need cash. When the time comes, it won’t feel like a rushed process either, and the odds will be more favorable.
During my time as founder Wengler, I implemented this strategy in several rounds of funding. At one point, I prepared seven competing term sheets for a $17 million Series B round and got the first offer in just a few text messages.
related: 4 Expert Tips on How to Network and Find Investors for Your New Business
2. Don’t share good news until it’s 100% confirmed
When meeting with investors, be careful to only share numbers you are confident you can beat. You should promise less and deliver more.
You will often find that some investors have an uncanny ability to recall every detail from previous meetings. You know, after every meeting, investors take notes or upload their ideas into the customer relationship management (CRM).
When I meet with entrepreneurs on behalf of my venture capital fund at: Lantian Capital, I documented every major fact that the founder shared with me. Occasionally I meet a founder who hypes their business just to burden offline. If I notice a repeated pattern of this behavior, it may undermine my trust in the founder and I will be less likely to invest. This is exactly what you want to avoid.
It’s best to only share positive messages after acknowledging the message. Don’t put yourself in a situation where you’re forced to justify something that didn’t materialize, like you didn’t close a big client, or revenue only grew by 50% instead of 75% (usually 50% is already impressive increased)).
Another tip: Be upfront about the challenges you face and seek advice from investors. Then, point out how their suggestions helped overcome the obstacles. This approach increases emotional attachment and builds trust.
3. Let new investors raise money for you
Once you have identified investors for a funding round, ask for introductions to at least three of their recommended co-investors. WARNING: Make sure you have a clear verbal or written commitment before doing this seeking introductions. Otherwise, potential investors may talk themselves out of investing, as it only takes one skeptical investor to convince the others.
Instead, you need a strong recommender to back up your deal. Investors will find the opportunity less risky when another investor they respect has done their due diligence and is 100% committed.
I saw this firsthand when I came to Silicon Valley as an immigrant with few connections in the United States. commitment and introduction.
related: 7 Ways to Maximize Your Business Mentoring Relationship
4. Keep investing
Unfortunately, some investors experience radio silence after investing in a company. While they want to give founders room to execute, they also need to keep their investors updated (yes, venture capitalists have their investors, too, called limited partners).
If you believe your investors will need to update their LPs on a quarterly basis, you should be aware of the importance of sending your LPs Investor news If not monthly, at least quarterly. Please don’t deceive your investors!
Whether you are breaking the news in person or virtually, you should always provide a formal written update. Always start every update with key metrics like revenue, cash balance, and cash runway. Ideally, it is presented in a valid format such as a table or chart.
Don’t send investors through a lengthy update without first addressing the headline issues. Otherwise, you risk losing their attention because they’ll be browsing your newsletter for this information anyway.
related: What does the venture capital due diligence process look like? Here’s your step-by-step guide.
When you make investors’ lives easy, they’ll appreciate how you operate and may want to continue working with you. This is what “duplicate founders” or “serial entrepreneur“Cleverly raising large amounts of capital for their next venture, often regardless of the performance of their previous one.
Investors make decisions on an emotional level, and by following these insider tips, you can build trust and manage investor relations like a pro.
