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A stable network of investors is indispensable for any entrepreneur. These connections can open doorways and write checks for you if you want them probably the most. In case you get it proper, buyers would possibly even proceed to again you far past your present enterprise. Nonetheless, mastering investor relations is a fancy course of.
Positive, there’s analysis that covers fundamentals resembling making a very good first impression, nailing your pitch and making certain buyers are the right fit. But there are additionally some hard-learned suggestions that you’ll solely hear from an insider.
Primarily based on my expertise as a founder who’s generated a 200x return for my first buyers, and in my present position as a enterprise capitalist with 50+ startup investments — I’ve realized fairly a couple of actionable suggestions alongside the best way.
Associated: 5 Tips for Navigating the Entrepreneur/Investor Relationship
1. Attain out to buyers far earlier than you are prepared
Keep away from the standard rushed technique of pitching investors you’ve got by no means met earlier than on a good timeline. This creates a transactional feeling and offers buyers a simple excuse to move.
You need to purpose to have interaction buyers on an emotional level, the place they’re left feeling like they’ve identified you personally from the beginning. To realize this, you need to attain out to potential buyers sooner than typical recommendation suggests, even when your thought feels unpolished. Be sure you talk that you simply aren’t fundraising, however looking for to construct a relationship forward of a possible financing.
It could take time to get conferences scheduled as there isn’t any urgency. Nonetheless, in case you keep persistent in following up, you may get the chance to lastly meet and have a real dialog quite than a high-pressure pitch.
Attempt to make two new connections like this per thirty days. Over time, this may develop into a big community you’ll be able to faucet into if you finally want the money. When that point comes, it will not really feel like a rushed course of both and the chances can be extra favorable.
Throughout my time as Founding father of Vungle, I applied this technique over a number of funding rounds. On one event, I had seven competing time period sheets for our $17 million Collection B financing, and it solely took some textual content messages to get the primary provide.
Associated: 4 Expert Tips on How to Network to Find Investors for Your New Business
2. Do not share excellent news till it is 100% confirmed
When assembly buyers, be conscious to solely share numbers you are assured you’ll beat. You need to under-promise — and over-deliver.
You will usually discover that some buyers have an uncanny means to recall each element from prior conferences. Know that buyers take notes or add their ideas into their buyer relationship administration (CRM) after each assembly.
After I meet entrepreneurs on behalf of my enterprise capital fund at Blue Field Capital, I’ve a log of each main truth a founder has ever shared with me. I often encounter a founder who hypes up their enterprise solely to disappoint down the road. If I discover a repeated sample of this conduct, it could break my belief within the founder and I will be much less more likely to make investments. That is exactly what you need to keep away from.
It is higher to solely share optimistic information when it is confirmed. Do not set your self up for a state of affairs the place you are pressed to justify what did not materialize, like a giant buyer you did not shut or revenues that solely grew 50% as a substitute of 75% (when ordinarily 50% is spectacular progress).
One other tip: Be upfront concerning the challenges you are going through and search recommendation from buyers. Later, level to how their recommendation helped overcome obstacles. This strategy will increase the emotional attachment and creates belief.
3. Make new buyers elevate cash for you
Upon getting confirmed buyers in a funding spherical, ask for introductions to no less than three co-investors they suggest. A phrase of warning: Guarantee you may have a transparent verbal or written dedication earlier than seeking introductions. In any other case, you danger potential buyers speaking themselves out of investing because it solely takes one skeptical investor to persuade the others.
As a substitute, you need a robust reference who will champion your deal. Buyers will see the chance as de-risked when one other investor they respect has already finished the due diligence and is 100% dedicated.
I witnessed this first-hand after I got here to Silicon Valley as an immigrant with nearly zero connections within the U.S. I raised a $2 million seed spherical from 30 totally different buyers, primarily by piggybacking on that first investor dedication and introductions.
Associated: 7 Ways to Maximize Mentor Relationships in Business
4. Maintain up your finish of the funding
Sadly, some buyers expertise radio silence after investing in an organization. Whereas they need to give founders area to execute, additionally they want updates for their very own buyers (sure, VCs have their buyers too, often known as LPs).
In case you think about that your buyers must replace their LPs each quarter, you need to admire the significance of sending your investor updates no less than as soon as per quarter, if not month-to-month. Please do not ghost your buyers!
You need to all the time present a proper written replace no matter whether or not you are additionally delivering information in particular person or nearly. All the time begin every replace with key metrics like income, money steadiness and money runway. Ideally, that is offered in an environment friendly format resembling a desk or graphs.
Do not make buyers labor via an extended replace with out addressing headline objects first. In any other case, you danger shedding their consideration as they will skim via your presentation for this info regardless.
Associated: What Does the Venture Capital Due Diligence Process Look Like? Here Is Your Step-by-Step Guide.
If you make life straightforward to your buyers, they will admire the best way you use and can seemingly need to proceed working with you. That is how “repeat founders” or “serial entrepreneurs” skillfully elevate giant quantities for his or her subsequent enterprise, usually no matter how their final firm carried out.
Buyers make choices on an emotional degree and by following these insider suggestions, you’ll be able to construct belief and handle investor relations like a professional.
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