Marketlend Academy: How To Work With Investors
It can feel like running a marathon just to go through the gruelling paces of building your business to the point where it is ready for investors. Once you cross that finish line, guess what? It’s time to run another one. That would be the race for investors.
Attracting investors and keeping them happy is another endurance test that comes with a lot of pressure. But how you do that can make all the difference in the financial health of your business and its future growth. Some of these tips might help you interact with investors in ways that concurrently discipline your organisation to become a better company.
- Continue running your organisation with confidence and integrity.
You may have offered others a stake in your business, but the worst thing you could do once you have their support is forget that you’re still in charge.
According to a recent MarketLend survey of our investors, the reason they’re most likely on board is because what you were already doing is working. More than 50 percent of respondents said they invest because of strong past financial performance, and another 23 percent do so because they were impressed with ongoing product or service innovation.
Investors will definitely bring critiques and opportunities to improve to your business, but you can’t let their opinions dominate your decision-making. If you do, pretty soon you’ll be spinning in circles instead of passing mile-markers on the way to your vision.
- Make decisions and do things that prioritise revenue.
When you’ve finally got the big bucks, you suddenly have a chance to move forward many of your best ideas. It’s easy to fall victim to problems like mission creep or green-lighting risky strategies. If you find yourself spread too thin or tempted to veer off budget with your new-found cash, it’s time to course correct. Stick to your business plan.
In our MarketLend survey, 50 percent of investors said the best business plans sold them on the idea that the company has a clear path to revenue. Unless you have equally clear evidence that a change in course will yield better results without exceeding projected expenditures, do the things you said you would do.
- Develop a strategic and consistent internal communication plan with your investors.
Investors will expect periodic reports on how the company is doing. At a minimum, they will expect and appreciate a consistent and transparent bookkeeping system that will reassure them that their investment is being well-spent. But this is also about relationship-building. Your approach going into these interactions—especially the first few!—will set the long-term dynamic.
You’ll want to establish openness and respect from the start, but you also need to know before you open your mouth or put up a PowerPoint presentation what kind of relationship you want with your investors.
Your investors don’t need to be overlords. They most likely don’t want to be. So don’t give them that power. After all, you know your business best. The entrepreneurial resource First Round Review has many relevant insights regarding how to achieve this relationship balance in its guide, “The Secret to Making Board Meetings Suck Less.”
- If you have bad news, present it directly and have a solution ready.
You will inevitably have to deliver bad news to investors at some point in your relationship. This is normal, and it’s a chance to present yourself as a strong leader and a problem-solver..
If you have to drop negative numbers or acknowledge mistakes, according to recent research from the Institute of Electrical and Electronics Engineers, it’s best to be direct. Don’t hide or gloss over the obstacle. Get it out there quickly, give investors a moment to process, and pitch them your ideas on what can be done to improve things. If you manage this well, your investors will have more confidence, not less, in your business and your ability to lead it.
- Understand each investor’s expectations and keep them in perspective.
Whether you have a few investors with whom you have direct personal relationships or thousands of crowd-funders you’ve never met, try to find out why exactly they came on board. This can take place via 1-on-1 conversations or through a digital polling tool. When you know what they saw in you, then you can deliver on their expectations.
You may be surprised to discover how realistic your investors are about the prospect of your mutual success. It might even alleviate some of the constant pressure to perform.
As one MarketLend survey participant said: “I look at the character and integrity of the people as best I can assess it. Even if the business goes down, the best quality people will find a way to meet their obligations.”