AN INTRODUCTORY GUIDE
How to manage investor relations as a founder
Seven recommendations for founders of early-stage tech companies
Teaming up with investors such as business angels, venture capital funds, or strategic investors can significantly accelerate young companies’ development. At the same time, it comes along with certain obligations that you need to deal with as a founder.
In the following, I have summarized seven recommendations on how to work with and manage relations to investors based on my experience as a founder, investor, and advisor of early-stage tech companies.
1. Founder responsibility
Just as fundraising, managing relations to existing investors is one of your key responsibilities as a founder. It often accounts for a significant amount of time and does not have direct impact on business operations. Still, it is a useful investment of time, as it lays the foundation for a well-functioning founder-investor team. To ensure efficient distribution of responsibilities, one person — typically the CEO — should be responsible for managing investor relations and involve the rest of the founding team whenever necessary.
2. Open and honest communication
Investors obviously like to celebrate successes with their portfolio companies. However, based on their profound experience with other early stage companies they should be even more helpful in crisis and critical situations. Involving them in such situations early on, can make the difference between “weathering the storm” and putting the entire business at risk. In addition, trying to hide critical information has the potential to harm your investor relations significantly. Therefore, I strongly recommend communicating in an open, honest, and direct manner with your investors at any time. Never ever try to make things look better than they are!
3. Mutual understanding
A mutual understanding in the founder-investor team is important for a close and long-lasting collaboration. It ensures investors understand your business, roadmap, and ways of working in detail. At the same time, it allows you as founders to understand how to benefit from your investors. While the process of due diligence already creates a detailed understanding between founders and investors, there are ways to manifest a close collaboration even further. If investors don’t ask for it proactively, I for example encourage you to invite investors to join you in your office periodically and participate in some of your daily routines and tasks.
4. Aligned roadmap and focus KPIs
To avoid misunderstandings and at the same time benefit from your investors’ expertise, I also recommend regularly aligning your roadmap and most important priorities with your investors. Board meetings are for example an excellent setting to share and discuss such topics (see next chapter for more details). In this context, it also makes sense to align on a set of focus KPIs, which reflect your roadmap and priorities. You can then share the development of these KPIs regularly with your investors to keep them up to date on roadmap achievement.
5. Agreed update and meeting structure
To keep investors up to date on recent developments and involve them in critical questions and strategic decisions, it makes sense to set up an agreed update and meeting structure. I have made positive experiences with a combination of monthly update calls and quarterly board meetings. The former allows you to share recent developments and monthly KPI updates as well as to ask for help / support on selected issues in an efficient manner (typically a one-hour video conference). The latter serves as a platform to discuss important strategic questions and align on critical decisions (typically in a half- or full-day face-to-face meeting). As there is no right or wrong here (except for having no structure at all in place), I recommend asking your investors for their expectations, e.g. with regards to format and frequency, and setting up a structure accordingly.
6. Lean update and meeting preparation
Preparing monthly investor updates and board meetings can be a timely activity. Leveraging agreed standard procedures and templates, allows you to prepare meetings as efficient as possible, while still guaranteeing maximum insight for your investors. For monthly investor updates I have typically distributed a set of slides with graphs displaying the monthly development of critical KPIs as well as a more detailed dashboard (e.g. as a spreadsheet). Alternatively, you can also grant investors access to a business intelligence dashboard (if you already have one in place). This allows investors to check your KPIs real-time whenever they want without creating any recurring effort for you. For board meetings, I consider it helpful to also follow a standard procedure from preparation to documentation and follow-up. Various helpful resources are available online on how to prepare and run board meetings. I for example like the article “Getting most out of your board — as a Seed or Series A entrepreneur”, which contains a chapter on the ideal board meeting preparation, and the “Board Deck Template”, both by Creandum.
7. New investor updates
Building and managing relations to potential future investors is an important part of investor relations as well. Even when no financing round is in preparation, I therefore recommend keeping potential investors up to date regularly. In this regard, sending a quarterly update newsletter is a simple and efficient means. On top of this, selectively (!) participating in startup and investor conferences (e.g. NOAH) allows you to reach and update many potential investors in one place with limited effort. Sharing latest developments and achievements with potential future investors keeps them engaged and enables you to initiate detailed conversations at the beginning of a new financing round more easily.
Closing remarks
Finally, there are certainly further best practices to master investor relations. Many experienced investors also have their own perspective on how to collaborate with founders. Some investors don’t want to get involved as frequently as others. Above all, I therefore recommend asking your investors for their expectations on the above topics early on and regularly (e.g. yearly) reviewing the agreed mode.
As usual, the article is based on my own experiences and does not claim to be complete. Therefore, feel free to share your thoughts, additions, and critical remarks on how to manage investor relations as founder of an early-stage tech company.
Special thanks to Peter Specht for reviewing an earlier version of this article.
