You might think closing a funding round is the end of a journey. In fact, its just the start! Now comes the hard work of delivering the milestones you’ve promised and working with your investors to build supportive and productive relationships.
Hatty Fawcett, founder of Focused For Business, discussed the importance of building productive relationships with your investors with the team at Finance Digest. This is an important part of a startup’s journey, as investors can help you transform your ideas into reality and connect you with people who help your business thrive and succeed.
How Do You Cultivate a Productive Relationship With Your Investors?
You’ve spent countless nights meticulously refining your business plan, expending all your energy on exhaustive research, tiring your hands with endless paperwork, and even losing your voice from numerous investor meetings. But it has all paid off—you’ve secured the funding for your new venture, and a huge weight has been lifted off your shoulders.
Congratulations! However, this milestone marks just the beginning of your journey. Now, you need to focus on building and maintaining a strong relationship with your investors. This is crucial for a startup’s success, as investors can help turn your ideas into reality and connect you with the right people to help your business flourish.
So, how do you cultivate a productive relationship with your investors?
Be as Transparent as Possible
The golden rule for maintaining a successful relationship with your investors is transparency. Whether it’s withholding critical details about your business strategy or failing to explain why performance fell short of forecasts, a lack of communication can lead to bad feelings, uncomfortable conversations, and potentially jeopardise future investments.
To avoid this, be proactive and demonstrate your trustworthiness. Investors value openness and understand that running a business isn’t always smooth sailing. Acknowledge setbacks, regroup, and try different strategies. Hiring mentors can also help you navigate challenging situations and provide coaching support for building productive relationships.
Align Your Values but Acknowledge Differences
Establishing your values is key when building rapport with investors. Understanding your mission, beliefs, and goals will improve mutual understanding and instill confidence. The value in an investor relationship extends beyond finance. Ensuring you’re aligned on the direction of the business will enable investors to contribute in other ways, such as through their network.
Disagreements are healthy, so leave room for discussion. Consistent communication is vital to address any changes in priorities. If differences arise post-investment, have a process for handling them to prevent issues from festering. Remember, investors expect good results over time, so anything that could hinder or delay that should be acknowledged and addressed.
Provide Regular Updates
Before you secure investment, keep investors updated on the progress of the funding round. Share any new developments to demonstrate your progress. After securing investment, continue to keep investors informed about your progress. A minimum of quarterly updates is advisable. Keeping investors in the dark can damage your credibility.
Seek Feedback and Appreciate Knowledge
We’re all on a learning curve, and it doesn’t have to impact your performance negatively. Ask investors for their opinions, especially if they have experience in areas you don’t. Listen to their feedback, consider whether your plans need adjustments, and be clear about why you’re taking a particular course of action. Agreeing on objectives and expectations makes it easier to review performance later. Willingness to learn will foster a fruitful relationship that benefits everyone. Be specific about where you value their guidance and appreciate what they share. Demonstrating interest in their ideas and openness to scrutiny will strengthen the relationship.
Be Proactive, Attentive, and Assertive
Lastly, exhibit these key characteristics—proactivity, attentiveness, and assertiveness—when managing relationships with investors. These traits drive action and productive relationships, enhancing your credibility. Being proactive moves things forward and prepares you to address issues as they arise. Attentiveness helps you understand the investor’s perspective and respond empathetically. It’s also crucial to have clear boundaries and assertively stand your ground when necessary. Avoid saying yes to every opportunity and focus on what truly benefits your business. Align with investors who share your vision and strategy to prevent future conflicts.
Investors have a shared stake in your business, both present and future. It’s in their interest—and yours—that your business succeeds, as this ensures a good return on their investment. Raising capital and maintaining supportive investors are two sides of the same coin—you need both! Remember, the best relationships are reciprocal and involve give and take, and this is especially true for relationships between founders and investors.
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