How to Get the Best Out of Your Investors
The vast majority of the content that has been written about founder-investor relations is about fundraising. That makes sense considering how important the outcome of a fundraising process can be to a startup. But if you think about it, the fundraising dance represents only a small portion of the relationship between a founder and an investor — one that can last 10 years or more. Just like any long-term relationship, you need to put in effort to stay aligned.
Here are 5 things every founder should do to more effectively manage investor relations in order to get the best out of your investors:
1. Send Regular Investor Updates
When I was a founder, I wrote weekly investor updates. Every Sunday night, I dutifully spent 1-2 hours in front of my computer writing them.
And you know what? I hated every minute of it. But it was one of the most important, impactful things I did as a founder.
Consistency breeds trust. And trust is one of the most important things a founder can develop with their investors. Moreover, sending regular investor updates ensures that all of your investors have context into the business, which places them in a much stronger position to help when you need it.
2. Hold Quarterly Check-in Calls
In addition to sending regular updates, schedule a check-in call with each of your investors every quarter. Not just the board members. Not just the VCs. All of your investors.
Many founders deprioritize communicating with smaller investors — particularly angel investors and early-stage VCs — as the business grows. This is a huge missed opportunity. On one hand, you only have so many hours in the day. On the other hand, your earliest investors are the individuals and firms who believed in you from the start. They tend to have the strongest emotional connection to your success and are generally the closest aligned to your goals as a founder. They might not have the largest financial stake in the company, but they’re often the ones most willing to roll up their sleeves when things get tough.
The best founders I know make a point of checking in with all of their investors on a quarterly basis. Part of this is customer success 101 — you want to make sure that your investors ❤️ still you — but it also helps to foster an unfair advantage in your corner. By staying top-of-mind with all of your investors, you increase the likelihood that they’ll opt in to helping you when you need it (whether that’s for introductions, feedback or more money).
3. Be Intentional with All Investor Communications
I can’t tell you how often I get a DocuSign link asking for a signature related to a company I’m an investor in without any context or advanced notice.
A couple of points here:
The first time I hear about a legal document shouldn’t be from your lawyer (unless I’m getting sued).
The first time I hear about a legal document shouldn’t be the moment you need a signature.
I received the above DocuSign link from the law firm of a startup that I’m an angel investor in, having not heard anything from the founder for more than 6 months. This kicked off a week-long email thread as I tried to come up to speed on the purpose of the legal document, its background context and the implications for me as an investor. The document ended up being completely innocuous, but the unnecessary back-and-forth wasted my time (and that of other investors), plus added weeks to the process.
It also put a spotlight on the fact that none of us had heard from the founder in months.
In the course of your founder journey, there will be countless legal agreements that you need to execute, many of which require investor signatures. Founders often spend so much time working on these documents with their counsel and board that they forget that every other investor needs time to review and digest the documents. If you don’t give everyone a heads-up, you’re likely adding 2-3 weeks to the process (plus making your smaller investors feel unvalued). In contrast, if you send all of your investors a quick email a couple of weeks in advance, you can manage any questions while the finishing touches are being put on the documents and have everyone lined up and ready to sign.
Imagine if, instead of receiving the DocuSign link above as my first touch point, I received this email from the founder:
Dear Chris,
I hope you’re doing well. Just giving you a heads-up that we’re working on X (which is going to require your signature). Here are the implications of X on you as an investor:
…
Feel free to reach out if you have any questions. You can expect to receive a DocuSign from Y in about a week.
(This took me 45-seconds to write…so there’s legitimately no excuse for not doing this.)
4. Don’t Outsource Your Investor Relations
Another common mistake I see founders make is trying to “outsource” investor relations to someone else in the organization (typically a chief of staff or business development role). Similar to (2), I understand the desire to do this — managing smaller investors can seem so far down the list of priorities as the company grows — but it’s an optimization that is rarely worth it.
Given that the CEO is the person responsible for all fundraising, each-and-every investor on your cap table ultimately made a decision to invest in you. Not your company. Not your product. You. Which means that once in a blue moon, that person or firm will want to hear from the CEO. And they deserve to. Notwithstanding particularly needy investors (and let’s be clear, those exist), you should continue to personally field emails and calls from every investor on your cap table — regardless of size — until the finish line.
The big picture cost is minimal — maybe a half-hour every six months. And the upside can be significant. There’s usually a reason beyond money why each investor is on your cap table. Remind yourself of that fact and you can often find the smallest of investors will continue to deliver outsized value for you and your company.
5. Assume Your Investors Talk to Each Other
Another mistake I see many founders make — particularly first-time founders — is that they presume that their investors don’t talk to one-another. While this is typically a reasonable assumption to make when it comes to angel investors (especially if they have no prior relationship), it’s hardly the case with VCs or board members.
By the time the ink is dry on your cap table, you should assume that most of your investors have spoken to each other.
This is not to say that your investors are plotting against you behind your back, but it’s important for you to keep in mind that back-channeling is happening regularly. Investors will often connect after board meetings to debrief on the proceedings or to get another perspective on significant changes in the business. They’ll also regularly speak on topics related to fundraising, investing and potential exits.
More often than not, these conversations are innocuous and beneficial to the business (in my experience, the most common topic of conversation between co-investors is how they can work together to support the startup). But keep in mind that these touch points exist, especially when managing sensitive communications.