From Deck to Post Check: Onboarding New Investors
You just raised a round. You’ve got the check in hand. Hiring and product updates moving along. Things are heading in the right direction. Now what?
While bringing on a new set of investors is exciting for your business there are unique steps to “onboarding” new investors to make sure all parties are getting the most of the new partnership.
Ideally, you selected your new investors strategically and did your own due diligence through the fundraising process but as Faisal Hoque puts it, “Funding can actually kill your venture, especially when there is a major disconnect between you and your investor”. It is vital to your investor relations to establish a communication strategy, build a data distribution system, and set expectations and goals.
Develop a roadmap & expectations
Hopefully, expectations and goals were set during the fundraising process from both sides of the table. Your expectation will likely evolve over time as your relationships and company continue to grow. At this point, it should be pretty clear what everyone brings to the table and what direction the company is headed. However, it is still vital to lay out any expectations, by both parties, once the check is signed.
Bringing on a new VC is bringing on a new business partner. It is essential to have a clear set of goals that are aligned for both your company and investors. Having stakeholders with different ambitions and goals can lead to a less than optimal experience to say the least. Clement Vouillon of Point Nine Capital offers a good starting point in the questions below:
“There is no right or wrong here, but by thinking about what you need, it will be easier for you and your investors to get aligned:
- Do you need a “hands-on” type of relationship? Or you want to keep it very light?
- Are you aware of “weaknesses” in your founding team that could be filled by your investors knowledge (education) or network (hiring)
- Do you need industry specific knowledge or specific value add that your investors offer?”
Or Jason Lemkin offers a more cut and dry approach in a Social Contract, “I don’t know the answer. But I’ve decided the answer is — You Owe Your VCs 3x. That’s the Social Contract. VCs target 3x as absolute return on investment.”
Data Distribution and Communication
Organization is key when it comes to managing your investor relations.
After you raise your round one of the first questions you should ask is “how am I going to communicate and interact with my investors?”. While building a rapport is ultimately dictated by the stakeholders involved we generally find the following structure to be most popular and work for many founders and VCs.
Chances are this will be the main line of communication you have with your investors and board members. There are countless resources, templates, and guidelines for running a board meeting but suggest checking out “How to Make Board Meetings Suck Less” if you’re looking for a place to start.
“The most effective CEOs that I’ve observed send regular, short, board update emails every few weeks or monthly just to give the board a sense of what is going on. Of course it’s not required and many don’t do it. But I find that the more informed your board is and the more you’re staying on their radar screen the more effective they’ll be for you.” — Mark Suster
While the internet is flooded with content and resources for “investor reports” many founders still don’t do it. To make the most of your new investors and board members, turn your monthly updates into a habit and slowly tailor the format, content, and frequency to the likings of all parties. Check out this example of a monthly report to get the ball rolling.
Best used to supplement a monthly email or update. Instead of exchanging emails back and forth quickly jump on a call to go over any financials, product updates, roadmap, etc. Be sure to set a clear agenda so you don’t lose control over your meeting.
All of your investors will bring a different set of skills and resources to the table. If you have a specific asks for hiring, intros, strategy, etc. don’t be afraid to tap into your investor’s network and hop on a one-on-one call.
“Many business executives seeking to create shareholder value also rely on intuition in selecting statistics. The metrics companies use most often to measure, manage, and communicate results — often called key performance indicators — include financial measures such as sales growth and earnings per share (EPS) growth in addition to nonfinancial measures such as loyalty and product quality. Yet, as we’ll see, these have only a loose connection to the objective of creating value.”
For an early stage company, you will most likely need to set what metrics you are tracking and sharing with your investors. The most important thing here is sharing your metrics/data on a recurring basis and allowing your investors to “connect the dots”. What metrics you are tracking are totally reliant on your business, market, vertical, etc. If you’re looking for a place to start we suggest the “16 Startup Metrics” from a16z and “How to Steal the Right Growth Metrics for Your Startup”.
Build Relationships & Leverage Resources
Different investors bring different skills, experiences, and resources to the table but according to Vinod Khosla very few add value:
“Maybe some percentage that’s substantially larger than 95 percent of VCs add zero value. I would bet that 70–80 percent add negative value to a startup in their advising.” -Vinod Khosla
Build professional and personal relationships with all of your investors but if you are lucky enough to have an investor that offers real value make sure to single out these investors. As Jason Lemkin puts it, you are fundraising 52 weeks a year and need to be building and maintaining relationships with your current and potential VCs at all times.
Outside of your investor’s experience and network, make sure to tap into any events, perks, discounts, and other resources your investors offer as well.