What can founders do to win investors over?
Hint: it doesn’t require skill, it’s easy, and free!
Answer: Greater transparency in due diligence and beyond.
I like to think of due diligence as the “talking stage” with founders before I enter into a lasting relationship with them.
Having more transparent and frequent 2-way communication from the beginning is important for us to decide if we are the best partners for each other.
Disclosing more information during diligence can feel scary and vulnerable for some founders.
What if some investors don’t like what they see and are turned off? What if investors get bogged down in certain details, and lose sight of what founders would rather prioritize?
Transparency, mutual respect, and empathy are qualities needed for a long-term match, and to quickly determine the best partners for you.
Founders who are proactive and send updates to their investors in the form of a short report, email with bullet points, or quick call every 4-8 weeks have better success finding trustworthy and helpful partners. These updates ideally include comprehensive highlights AND lowlights.
Investors who feel well-informed on a startup’s progress are more likely to push for initial (or further) investment and continue the relationship.
We sometimes like to ask for the last 3 updates a company (depending on stage) has sent to their investors as part of our process. This provides critical data points to assess founders’ velocity/progress, but also level of transparency.
Each update also allows founders to stay on top of investors’ radars, so we’re better positioned to help you when we see or hear something relevant, and to proactively problem solve when things aren’t going as expected.
Psst…and guess what, it comes with more useful connections, advice, and resources!
What does a great investor update look like?
(1) Honest analysis of existing problems, accompanied by founders’ thoughts on how they will handle them.
(2) Well-in-advance notice of fundraising rounds. A heads-up helps investors put the pieces in place to close rounds quicker. We can think ahead regarding check sizes, pull in other investors as needed, and offer advice to founders regarding their positioning for fundraising.
(3) List of most important KPIs that are also most relevant to investors and your business (team size, burn rate, $ in bank, MoM growth, new partnerships, yield rates, etc). Visuals are most helpful.
(4) Current status of the business, and tangible objectives for the next update. Thinking ahead inherently challenges founders to check-in with themselves and their big picture vision to see if they’re still on track.
(5) Clear questions and requests for help from investors. Even, proactively reach out for 1:1 calls! The more specificity you have here, the better (eg, introductions to folks in X roles at Y companies as partners).
I’m most curious to hear from founders, what are your best practices for engaging investors?
