Why Startup Founders should invest in their investors
Lots of founders underestimate the importance of creating relationships with their investors which — it is true — can take time, energy and can take focus away from your day to day activities.
How do you build sustainable relationships? Investors might simply seem like a source of capital, however, they can offer so much more, and they can have a considerable impact on your business and its development, beyond providing funds.. They can provide future funding, experience, support and network to help grow your business.
We’ve asked Eric Theunis, Investment Manager at BeeFounders, what advice he would give founders on how to build a ‘good’ relationship strategy with investors. Here’s what he shared.
How do you look for investors?
🧑💻 Develop your storytelling skills
It all starts with you! Attracting funds is all about convincing investors and it depends highly on your storytelling skills. investors will obviously look at your product, your market, your business model, etc… but they will mainly evaluate your capacity as an entrepreneur to drive and develop the business. And you will need to be convincing and engaging!
Be ambitious in your vision and plan, but be careful though to not oversell or make false promises which could turn against you.
🗣 Understand their motivations
If you are in a position where you can “choose” your investors, it is important to understand their true motivations and make sure these are aligned with yours.
Ask yourself whether they are investing in your company :
- for a return on investment?
- to support entrepreneurship?
- to share their experience?
- Because they “like” your product/service, or you?
Building a diversity in the investors’ pool is beneficial for founders as they can leverage a huge amount of skills and networks generally not present in the team.
🤝 Build trust
Build personal relationships early on with your investors. Ask their input, their feedback. Ask personal questions (where appropriate). Invite them for lunch or breakfast. Listen to them
Investors have invested in you, so they need to trust you, the more they trust you, the more they will support you and let you drive the company
Know your investors personally, understand:
- What type of investors they are
- Why they invested in your company
- What are their expectations
The time you will invest in building individual relationships by understanding their motivations, values, visions and background will be of great value for your business..
What can your investors expect from you?
Just seeing them once a year at your General Assembly would be far from sufficient, especially if you’re a startup and change is part of your DNA. Startups are not straight lines no matter how much experience you have.
It is therefore essential that you continue building the relationship with your investors by communicating in pull mode, asking their input, listening to their advice and eventually get their trust. Even if you are the CEO, the owner of the vision and the only one who will have the stamina to endure all the ups and downs, you want to have their support in your decision making.
5 do’s on how to communicate :
- Be transparent and honest, don’t try to hide the situation.
- Send an Investment Update twice a year and meet physically at least once a year with all investors (outside of the General Assembly) to maintain the relationship.
- Share the important milestones of your company, don’t overshare details. Frame the conversation.
- Prepare for your meeting, especially for difficult conversations, it can be helpful to do some kind of “lobbying” with some of your investors who have stronger opinions and are considered as leaders in your group of investors. Understanding their positions in advance will help you get allies and easier navigate the conversation.
- Come confident to meetings, show your leadership by bringing proposals to the table. The role of your investors is to make decisions, not to brainstorm.
What can you expect from your investors?
Some founders need a soundboard to gain perspective, be challenged, and reconsider where they stand. Investors not only provide a large chunk of money, if you manage relationships well, they will also be of a lot of support to important decisions, they can open doors for you and provide strategic advice.
They are also involved in the governance of the company from day one, they are part of the GA and some investors will want to be (represented) at the Board.
It is key however, that investors don’t become involved in the operations of the company and that their involvement remains at their level of decisions in the company; all operational decisions should be taken by you as CEO.
In the end, whether it’s angels or a VC firm investing in your company, you need individuals who will challenge and support you to bring your company to success. That is the bottom line.
Eric Theunis is Investment Manager at BeeFounders.
