The importance of maintaining good investor relations can’t be over-stated; they can be the lifeblood for so many small businesses.
Here are five key reasons why:
- Follow-on investments as your company evolves
If somebody had enough faith to invest in your start-up, chances are they will continue to support you as you grow, and therefore fund rounds with cash injections. Avoid making your investor feel like an ATM. If you are forever turning up with a begging bowl, the chances of investors participating in follow-on rounds or investing in a follow-on company (if the first company fails) decrease to zero.
- The investment community is small
Neglect your original stakeholder and they’ll be reluctant to fund your next round. The investment community is built on relationships and reputation. Good investor relations (IR) is all about honest communication and it’s crucial to keep these ideals in mind to prevent you from damaging your brand and integrity.
- Your biggest champions
Investors can become your biggest champions. Many identify with the brand and its ideology; they are not just investing, they’re joining a brand they care about. If you don’t keep them informed, they will quickly start to feel as though they don’t matter to you.
- First in-line to help
A 2018 British Business Bank survey stated that 39% of angels invest in a start-up to contribute their knowledge and experience in that sector. Tony Goodwin, CEO of recruitment giant Antal International, says he only invests in recruitment start-ups, as it’s his sector and he enjoys the mentoring. If your business struggles, don’t hide it from them; chances are, they’ll be able to help.
- It prepares your business for exit
When the time comes to exit, potential buyers will conduct due diligence on an unprecedented scale. Providing regular updates to investors with everything about your business in one place – via an IR tool – enables you, and your investors, to be better prepared.
Here are three top tips: if you want to keep investors happy and on your side:
- Go digital
The easiest way to look after your investors is to go digital; Envestry for Scale-ups, for example, offers everything you need to keep your investors happy, including a secure data room and a Q&A facility. Even if you decide to go it alone, ensure that you have a dedicated IR section on your website – which can be password protected – having all the relevant information in one place shows how much you value them.
- Be upfront, honest and consistent
An investor won’t appreciate having to dig deep to uncover potentially critical information.
Fintech app Revolut, for example, has faced off accusations of fabricating data, money laundering and most recently misplacing a £70,000 money transfer. Pity their investors, however, as they had to read about it in the press. Had they regularly and scrupulously shared everything with them, they might find themselves facing a less uncertain future. Quite simply, investors need regular updates.
It’s easy to make the Shareholder’s Report – particularly if it’s not as healthy as you’d like – less of a blow if you add a personal touch: if you make t shirts, send them a t shirt. If you’re a tech company, give them a discount – anything to keep them happy to be on your team. A small gesture can make a big difference. Ombar send chocolate with their updates – a great way to keep your investors feeling good.
Ombar demonstrating great IR
- Reach out to your investors
Good IR enables your investors to help when things are tough – the same goes for the good news: communication enables them to identify possible growth opportunities, partnerships or new business angles. If they’ve given you money, they care and it’s your duty to keep the dialogue ongoing and mutual, so that when you need advice, an opinion, an introduction to new investors or simply to help promote a new product, you just have to ask.
Understanding the whys and ways to building a great relationship with your investors will keep them rooting for you through the good times – and the tough times.
About the Author
Scott Haughton is COO of Envestors. Envestors is a fintech company that connects investors and scale-up companies. With our fundraising platform Envestry for Scale-ups, companies get a personalised site to promote deals, raise finance and engage with their investors 24 hours a day, 365 days a year.
We know first-hand Envestry delivers—we’ve raised £100m+ for over 200 companies through our own private investor network.
Founded in 2004, Envestors is regulated by the FCA and has offices in the UK, the Channel Islands, the UAE and strategic partners across China.