Knowing how to communicate effectively is a superpower in the world of startups. This does not only refer to founders who need to manage teams, or ambitious entrepreneurs who are trying to grow their network. It also goes for your ability to communicate with investors.
Knowing how to communicate with investors is crucial, and the way you go about it determines how you manage their expectations, the level of trust they put in you, as well as the value you receive from their network and experience.
In this article we discuss how you should approach communication with investors during different stages of your relationship, and tips to help you maximize what you get out of it.
Communication with Investors
Even before you create startup investment proposal, you should research your target. Look them up on LinkedIn, and make sure you research the niches which they have expertise in. The goal at this point is to gather as much information as possible to help you navigate the conversation to your benefit once you try to establish a relationship.
Start by reaching out to founders that have previously worked with the investors you are trying to get onboard and search for success stories as well as failures. What did they have in common and what can you learn from them before reaching out to investors?
You should also learn an investor’s management style. Whether they are active participants or more passive investors will make a difference in how you approach and work with them. You may need to talk to other founders to find this out.
This information can help you craft a better presentation and also frame future conversations — because everything you do in the future will go back to what you promised in your proposal. If things change from your initial plan, you’ll need to be prepared to discuss the reasons why.
The best way to maintain regular communications with investors is to schedule meetings and reports in advance. Set them up as early as possible and mark them down on your calendar. Then, set reminders within your calendar to give you enough time to plan the conversations. You want to have a goal in each meeting.
For better communication with investors, schedule:
One on One Calls
Even if there is a group of investors involved, you want to forge a relationship with each one of them. Initiate regular, scheduled calls with each investor. Check-in calls can help build that relationship, but you should always have a purpose – which you need to state upfront whether it’s a brainstorming session, responding to an inquiry, giving a personal progress report, or some other reason.
In advance of conference calls, you’ll want to submit monthly progress reports about the KPIs and financials. You’ll want to have conversations at the beginning of your relationship so you know what information investors will want as part of your report. Typically, you’ll want to focus on progress against goals, cash in the bank, burn rate, and any problems or roadblocks that have arisen.
The written monthly report will save you time on the call. Instead of having to read off numbers, you can provide context and analysis and answer investor questions to make sure they are comfortable with the direction you’re going.
Virtual and In-person Meetings
Since you want to make your investors comfortable, ask whether they’d prefer to conduct meetings virtually. You always want to respect their time and preferences. It’s preferable, however, to do meetings in person if possible. While we’ve all been forced to do remote calls and video conferences lately, but nothing beats in-person meeting with invetors.
Every conversation should reinforce the excitement and potential investors saw when they first made the funding commitment.
You should also have impromptu communication to share important development, milestones, obstacles, or to ask for advice. Unexpected challenges to your business plan should always be shared.
How to Talk to Investors
Investors hear a lot of pitches, so keep communication with investors short and concise.
While facts are great to support a point, pages of facts can overwhelm listeners and make your presentation seem dry. Investors want to see passion and get excited about your idea. Instead of listing facts, tell stories.
- Define a real-life problem that potential customers are facing
- Explain how your solution solves the problem
- Demonstrate what steps you’ve taken to prove it works and the results of any testing
- Explain what you need, why you need it, and what you expect an investment to do
- Provide an exit strategy and a risk analysis
When doing follow-up meetings after getting funding, you need to provide consistent updates on progress against the goals you set out in your investment proposal.
Once you’ve landed the financing and got investors on board, you’ll still want to keep your conversations focused and to the point. When you get a chance to sit down in person or do a video chat, you want to have a clearly defined strategy for each meeting.
For formal presentations and conference calls, you’ll want to work up a brief agenda. It doesn’t have to be detailed, but you do want investors to know what you’ll be talking about in advance so they have time to prepare their thoughts.
Preparing for Investor Meetings
One mistake that founders make consistently is failing to adequately prepare for investor meetings. While you hope to develop a friendly and mentoring relationship, never forget it’s their money and you are therefore accountable to them. Hence, here are some tips to keep in mind:
- Always have an agenda which indicates the points of discussion as well as the time needed to go through the meeting.
- Reestablish the platform that you will be using for the meeting. Some investors are more familiar with Zoom than they are with Google Hangouts, while some may simply prefer a Skype call.
- Ask yourself and your team if the questions you will be posing are questions you cannot answer on your own first.
- If you wish to discuss challenges and bottlenecks, make sure you have tried to solve them first, or at least have an idea of what it will take to resolve them.
- Never overpromise - Doing so will lead to dreadful meetings due to your inability to meet investor expectations.
- Never be late and never interrupt the person talking.
Preparation also means practice. Whether you run through meetings in your head, talk them through with colleagues, or engage in active role-playing with others, it’s crucial that you prepare yourself ahead of time. Practicing might mean writing down the 10 toughest questions you think you’ll get and practicing your answers or gathering your leadership team and having them rapid-fire questions at you.
Investor Meetings in a Remote-First World
When you’re conducting remote meetings with investors, you want to make sure you’re even more efficient. Especially in a post-pandemic time where video calls are the new norm, it is imperative that everything works well:
- Make sure your settings are correct
- Ensure that the software you will use has screen sharing enabled
- Your camera and microphone work well
- Your WiFi connection is strong
Preparing for Remote Meetings
While you want to prepare just as diligently for any meeting with your investors, when you’re holding a meeting virtually, make sure you’ve sent an invite beforehand, paired with the agenda that you will be going through.
Here’s one more important tip. A few minutes before meeting with your investors, reach out to them on your discussion channel (Slack or other) and post a link to the meeting. If they need to download software or test the connection ahead of time, you don’t want to waste time waiting for it to happen at the start of your meeting.
Manage Your Location
You also want to make sure you pick a location where you won’t be interrupted. We are all too familiar what happens when you skip out on that:
Position Your Camera
If you plan to communicate with the use of camera, make sure it is placed in the right position. The camera should be at roughly eye level, which gives you a natural way to look directly at other participants. Looking up at you, down at you, or any other unnatural perspective isn’t flattering.
Once again, test out your camera and audio ahead of time to make sure they’re working properly.
During the Call
The mute button - An unspoken rule when it comes to communication with investors is your ability to know when to mute yourself. Activate your microphone when it is your turn to speak, especially when the meeting includes more than two people.
Make use of visuals - When you decide to share your screen, keep in mind that lengthy text will often look disturbing if you have to speak over it. Use slides, images, charts, and graphs to keep things interesting and explain them diligently.
Business Communication Tips
Having a better idea on the “savoir vivre” when it comes to business communication with investors, it might be a good idea to also mention a few generic tips:
- Honesty - Most experienced investors will notice your level of honesty from the first few meetings. They are people as well, which means that honesty and transparency are the foundations of your relationship.
- Wrap bad news into exciting opportunities - If problems arise, don’t hide them. Instead, try to find a solution that will help you leverage the situation to make the most out of it.
- Recognize their Value - You are not the only one who wants to receive a compliment. Knowing how to show your appreciation for both the support you receive will take you a long way.
- Listen to their Concerns - Let’s face it, the concerns of investors are often uhm… inflated! However, they have a stake in your success and will thus push you towards it. Therefore, make sure you step in their shoes and try to understand their concerns. If they do not make sense, try to use common sense to manage expectations.
- Be Open to their Ideas - In other words, try to tame your ego. Don’t discard advice or suggestions thinking you know better. You will always learn from others who have walked the talk if you simply adopt an open minded approach to it.
- Edit and Proofread - Before sending anything in writing, read things through, especially when it comes to emails. This does not only refer to the information you want to pass to investors, but also the way things are written.
Investors need to know what’s going on in your business, and you need to know the length to which investors are willing to help. They are your partners and should be among the first people you turn to when you run into problems you’re struggling to solve. Each time you communicate, you’re building confidence that they can trust with their money.
You want to develop a relationship built on honesty and transparency to ensure future investments as well. After all, only a third of seed-funded startups get subsequent Series A funding. The better your communication with investors, the better chance you have to get follow-up financing and to make your business succeed.