Managing investor relationships

Companies with a healthy relationship with their investors are happier companies. Unhealthy relationship between investors and founders can be quite stressful. That’s why it is critical for startups and their investors to work as a team and be on one side of the table.

While some responsibility of ensuring a healthy relationship is obviously with the investors, founders have a critical role to play in this process.

Clarity on goals and objectives

The starting point of course is to ensure that your investors and founders are aligned on the goals & milestones and objectives of the company, and the parameters on which progress is to be measured.

Agree on the communication and intervention processes

Getting investor agreements on the periodicity and format of reporting and engagement is helpful in ensuring that the intervention is structured and planned. A monthly review is suggested for startups, though in concept stage companies founders may benefit from the experience and the business relationships of investors and hence may engage more frequently.

Communicate early on challenges and issues

No one expects to have a smooth journey and challenges and roadblocks are part of the journey. Your investors are critical stakeholders in your progress. Hence, if there are challenges and issues, often investors can assist with solutions. Communicate early and be transparent.

Reporting and templates

Investors and founders should agree on the format for reporting progress. Information that captures the key parameters should be drawn and presented every month to investors.

My suggestion is to provide a short summary of the health of the venture, capturing critical aspects that will be relevant to investors. I would suggest the following:
  • Overview – a one-para summary of what has happened since the last interaction (e.g. on product, customers, people, brand, etc.)
  • A para on how the business is progressing as per the plan (including what is working well, and what is not progressing well – could be on customers, pricing, costs, people, cost of servicing, etc.)
  • Highlight challenges or red flag any thing that you see as issues
  • Outline what you wish to achieve in the next month (I have noticed that investors may not pay too much attention to this para, as usually it is transactional and mundane. However, if it is not there, it usually creates discomfort. Just having even the regular stuff in this is reassuring that all seems to be well.)
  • If needed, seek assistance in any area that they can help
Another reason why I think a good, crisp report every month is a good idea is because it allows you to also reflect on the progress and helps you identify red flags for yourself earlier too.
In most cases, investors want to help. These type of reports provide investors a good view of where they can help, and allows you to seek out their support when and where required.

 

Have formal board meetings, including structured meetings with your advisory board members

Apart from it being mandatory governance requirements, quarterly board meetings are a good forum to engage with a wider group of stakeholders where progress, challenges, issues and direction changes, if any, can be discussed.

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Author: Prajakt Raut

Prajakt Raut is the founder of Applyifi.com, and author of the book for startups - ‘Starting Up & Fund Raising’ Prajakt personal goal in life is to encourage and assist a 100,000 people to become entrepreneurs. _____________ Prajakt is the founder of Applyifi - an online platform that provides startups a 36-point scorecard and assessment report on the venture's investment readiness [www.applyifi.com], and helps them improve their odds of getting funded. Prajakt is also the founding partner of The Growth Labs, a platform where growth-stage companies get sharp, incisive advice from senior professionals and experienced entrepreneurs. [www.thegrowthlabs.in] Before starting Applyifi, Prajakt was the head of operations at IAN, founding member of a leading incubator, and the Asia-Director for TiE (2004 - 2007). Previously Prajakt had co-founded Orange Cross, a healthcare services company, and was part of the founding team member of Idealake Technologies. While in college Prajakt had founded a printing business and has spent over 10 years working in leading advertising agencies. Prajakt’s book, ‘Starting Up & Fund Raising’, helps startups understand an investor’s perspective, and helps them improve their odds of getting funded. The book also helps entrepreneurs understand the building blocks of a business.

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