How To Get The Most Out Of Investors Before And After Close.

Any company that is raising capital needs to do more than search for cash— it needs to build and cultivate a network of investors that will help the business grow and succeed well past the closing of the funding round.


On our platform for equity investing, we have been successful both at channeling capital to growth companies and at facilitating communication through forums (and other means) to ensure businesses get the most out of their funding rounds and from their investors. We’ve also learned a lot about how to get the most out of your investors after they invest.

Here are 6 things you should keep in mind when thinking about how to work with investors after they invest in your business. Not surprisingly, the work should start before they invest.

Pre-close:

• Above all else, find savvy private equity investors. The potential investors to whom you are talking should have a thorough understanding of the risks of private equity investing. Do they recognize the importance of diversification in private equity? You can expect to be partners for 3-7 years, so you want investors who understand that private investments are high-risk, long-term, and illiquid. How many private investments have they made? Do they have a good grasp of your industry? In consumer and retail, you need investors who understand the trajectory of companies and are aware that the exit is typically not an IPO, but a strategic acquisition. What does that mean for how you should be planning for your cash burn and thinking through the strategy of the company?
• Develop ties to investors who share your vision. I like to compare the relationship between private investors and the leadership team of a company to a marriage. You need to date for a while, get to know one another, ask a lot of questions, and see if you are compatible. You want investors who understand your strategy and share your vision. They need to accept that you are in control, and be willing to support your strategy as you expand the business.
• Set expectations on communications. You should be crystal clear up front how often you will communicate with your investors—quarterly or monthly, typically, and certainly as needed during periods of transition or accelerated activity. Don’t be vague. In addition to the frequency, you want prospective investors to know in what form they will get updates. On our equity crowdfunding platform, we have private, secure forums that are open to investors. If your company does not have access to an investment platform that helps with these services, email is a good means of providing updates. Whatever channel you choose—whether it’s email, a secure forum, conference calls, or webcasts—it is important that you let investors know.
  English: email envelope (Photo credit: Wikipedia)
• Be clear what you want from your investors. Private investors can be an invaluable resource. The Angel Investment Performance Project, released by the Kauffman Foundation, found that angel investors generally are in their 50s, have a median 14.5 years of experience as entrepreneurs, and have founded more than two companies. Don’t overlook the wealth of knowledge and experience in your network of investors. Be candid with your prospective investors about what you need from them to help expand the business. Also be clear as to what you don’t need from them.

Post-close:

• Provide business updates. I’ve always found that investors appreciate entrepreneurs who communicate clearly and frequently. I recommend keeping investors updated at least quarterly, and preferably monthly. Share successes as well as issues and challenges. Investors hate surprises. You have enlisted the support of sophisticated men and women who know the risks of private investing and understand the ups and downs of business, so be honest. In my experience, the best business leaders communicate monthly, providing both an update on the business and making specific asks. The other reason to provide updates? Investors can’t help if they don’t have context.
• Make asks based on your investors’ experience. If you know your investors’ backgrounds, you should have a clear idea of when it is appropriate to ask for their help or guidance. I’ve found most investors are happy to help if the request is within reason. Asking for feedback on packaging is a reasonable request. Asking an investor to introduce you to the CEO of Target is not. Be realistic.

Attracting investors is a skill that every entrepreneur needs to develop in order to grow a business. If you go about the wrong way, you might get funding but little else. If you are thoughtful about how you interact with investors while raising funds and after close, then you will likely get the funding you need as well as the benefits of a productive and rewarding relationship with experienced and sophisticated investors.

 Article by Ryan Caldbeck .