The 3 Fundamentals of Building Relationships with Investors
Be prepared to play the long game
Many entrepreneurs want to raise money when they start their businesses, but they don’t know how to do it. Having the resources to build what you want may sound like a dream.
Raising money is a long-term game. Don’t expect to raise money fast. You need to build a relationship with investors, and that takes time.
I founded a gaming company in 2012, and in 2017 I raised US$1 million. Managing my relationship with all the investors I have met during my entrepreneurial journey was vital to that.
Raising money is like getting married. Usually, people date for a while before so they can know each other better.
#1 Send updates about your business
An investor won’t invest in a company he isn’t thinking about. You must remind them that your company exists and show them your growth. Otherwise, he will invest in another company. Is that what you want?
The best way to remind investors that your company exists is by sending updates about your business. They need to see how your company is doing. You can share your financial numbers and accomplishments. You can share anything that helps them know that you are doing a good job.
In 2015 I started to send a weekly report email to all investors I have met so far. The email was straightforward. It just had the revenue from the week of all of our products and some other small info.
It took me less than 5 minutes per week to send it. I had a spreadsheet with all our revenue data that showed me the numbers for each week.
Every new investor I met I added to our email list. I wasn’t using any email tool like MailChimp or ConvertKit. I was adding all the contacts on a group on Gmail.
Sometimes, someone asked to be removed from the list, as there was no option to unsubscribe. If the person wants to be out of the weekly report, he doesn’t want to help us.
We changed how we showed the email’s info quite a bit since the first one I sent. We wanted the email to be easy and fast for everyone to understand our plans and how we were doing. We also asked for feedback, which helped us understand better what the people reading valued the most.
#2 Ask for advice
Entrepreneurs usually forget that there are other ways besides money that an investor can help. There’s an old adage when it comes to investors that says: “If you want money, ask for advice. If you want advice, ask for money.”
Asking for advice is a great way to build a relationship with investors. However, don’t ask questions that you can find the answer to on Google. That will make you look stupid.
Ask for advice on key strategic decisions. Ask questions like:
- What are your thoughts about X?
- I’m considering doing Y. Do you have any experience with that?
- How did you solve Z problem at your company?
Not only ask for advice but declare your intention to do something about what the investor recommends. You can later share how you did it. That will keep the conversation going and your company at the head of the investor.
I met my investor while I was participating in a startup accelerator in 2015. He was a mentor for me before investing in my company in 2017. I learned a lot with him by asking for advice, which allowed me to grow my company.
At the end of 2016, we broke revenue records for ten weeks in a row. Every business update I sent was a new victory. After sending the 10th email, this investor said he wanted to talk to me. Two months later, he invested US$1 million in my company.
I didn’t ask for money in our updates. I only shared our accomplishments and pains. I kept asking for advice, and eventually, I received the money.
#3 Meet from time to time
Human beings are social beings. It’s hard to build a relationship with someone you never see. That is one of the main reasons that it is hard to have a long-distance relationship.
The best moment to meet investors is at conferences. Every industry has its own where the leading players attend. It’s an opportunity to meet new investors and keep in touch with the ones you already know. Remember that you have a deep relationship to build.
Attending conferences is a good investment for your company if you have a clear goal of what you want. I had a mentor that always remind me about that. Most of the conferences I attended were outside my country. I live in Brazil, and most of them are in the US and Europe. I couldn’t waste any money.
A goal for a conference can be the number of people you want to meet and talk to. That will help you organize your calendar.
I used the weekly email to share when I was about to attend a conference. That helped me to schedule meetings previously.
I used most of my time in conferences to talk to investors to share more updates, and ask for more advice. You can go a little deeper in some subjects as you now have more time to talk. Some of them told me how they were enjoying getting the weekly update. I was surprised. The weekly report was indeed working.
Pay for coffee or drinks every chance you get, as you are the person asking for the meeting. That will also help you build a relationship with investors. People don’t like to feel like they owe other people, and that may make them want to help you more.
Final thoughts
The more time investors have to get to know you and understand your business, the better your chances of investing in your company. Your first pitch is your first contact with them. That will help you to open other doors in the future if you build a proper relationship with them.
If you want to raise money for your startup, be prepared to play the long-term game. Start early and build a relationship with investors. That takes time.
I met my investor in September of 2015 and raised US$1 million in February of 2017. A lot happened during all this time.
Remember to:
- Send updates about your business
- Ask for advice
- Meet from time to time
