Investor Relations for Private Companies

Have you ever bought shares in the stock market? When you invest in the stock market, you expect to receive performance and strategic related updates from the companies you have invested in. This information directly affects your decision to either sell your shares, hold on to them, or buy more.

Similarly, it is important for private company investors to receive updates regularly through Investor Relations (IR) and it is your fiduciary responsibility as a startup/company to be transparent and communicate often with your investors. These updates should be financial updates as well as strategic and progress updates. Your investors need to know how their investment is doing. 📈 If you are dealing with a Venture Capital (VC) firm, they have a fiduciary responsibility to their Limited Partners (LPs), the ones who provide the money for the VC’s fund. If the VCs don’t know how their portfolio companies are doing, how are they supposed to provide an investor relations report to their own investors (LPs) or make decisions related to their investment? If you are dealing with a Corporate VC that is a public company, like Amazon, they need to report updated portfolio company financial data for tax purposes 💸 as well as in their earnings report for all the shareholders to view.

Purpose of Investor Relations

Here are items that are very important to communicate and discuss on a recurring basis with your investors:

· Earnings Forecast

· Earnings Release

· Dividends/Distribution

· Key Performance Indicators (KPI)

· Help Needed

· Board Meeting

· Shareholders Meeting

Your company is ever changing and evolving every day 🌱. While the list above is very important for recurring investor relations distribution, here are some items you should discuss as they come up:

· Capitalization (Cap) Table changes

· Leads for your product/service

· Future funding round and how it affects everyone’s ownership levels

· Product/Service launch

· Product/Service updates

· Open positions at the company

· Events you are hosting

· Beta testing

· Press release

It may seem like investors don’t really care about some of the items listed above, but they really do:

“Keeping up to date on KPIs, financials, key initiatives, and big hires is so helpful to having more substantive conversations rather than starting every conversation with a level-setting update. Transparency pays off.” — Late Stage Venture Investor

I keep my investors updated!

You and a lot of founders feel the same way. This may in fact be true for you but is highly unlikely. Before jumping to conclusions, lets see what the facts have to say. Zelkova Ventures researched this topic, and this is what they found:

75% of founders feel that their investors are sufficiently updated. Yet, 58% of investors feel their companies keep them sufficiently updated.

This indicates that while you may think 🙇 you keep your investors updated, you may want to reach out to them and make sure that is indeed an accurate statement.

How often should I update my investors?

That depends on how far along your startup/company is. The general rule of thumb for investor relations is:

Angel and Seed rounds → Every Month

Series A round → Every other month

Series B and on → Quarterly

While the above frequency is a general rule of thumb 👍, investors really like monthly updates. From the same study by Zelkova Ventures, 47% of founders provide monthly updates to their investors, however, 66% of investors want monthly updates.

“Keep investors up-to-date on a regular basis. When you hear from a company when they need capital, it is very off-putting.” — Angel Investor

Keeping your investors updated

A great deal of caution 🚧 should be used when updating your investor. All of your investors, doesn’t matter how much capital they have given you or what percentage of the company they own, should all get the updates at the same exact time. It can be tempting to send updates to only the top investors or the ones who have pro rata rights (rights to be first investors in next round). But remember, this can be seen as favoring one over the other and the last thing you want is your own investors to be upset or stop caring about you. Plus, law suits are expensive, and they suck!

“They [investors] should all get the same information, they should get it in the same time, they should get it with the same degree of candor, regardless of the amount of shares they own.” — Warren Buffett

Waccal for Investor Relations

Waccal makes managing IR easy for you by providing a suite of tools that remove non-value add tasks so you can focus on what really matters. Join others on the platform who are already seeing results. It’s free to get started. 😊 💃

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