It is probably not best to surprise your investors by hiding them in your pockets
Life in a startup is not always — read never — a straight path to success. So when life gives you lemons, it is key that you are able to communicate effectively with your investors.
Failure is an integral part of the process for startups, investors know that and what matters is not that an entrepreneur fails it is how he/she deals with it. Both current and prospective investors are keen on seeing first hand how an entrepreneur handles a crisis; this is how they build confidence in the Founder, their team and ultimately the company.
So in a crisis, what to do and what NOT to do…
Absolute NO: Take your investor(s) by surprise
The worst possible strategy is to schedule a meeting with your investor to “drop the bomb” on them with no warning. If they haven’t heard from you in a while and assume things are following the course… it’s a pretty terrible idea to blow the whole thing up.
By informing investors after it is too late, you expose yourself to these kind of judgments:
- You were oblivious to the situation until then, therefore, lack critical insights in your business
- You let problems grow out of proportion, therefore, can’t handle your business
- You didn’t reach out for help, therefore, are not taking advantage of the resources you have
- You did something wrong and are trying/have tried to cover it up with no success
- You are a poor communicator
The list is not exhaustive but you get the idea, NEVER take your investors by surprise, this will not reflect well on you as a leader or your business.
What to DO: Set up a communication plan and keep at it
The key here is consistency. Always communicate with your investors on a monthly basis. Keep it simple, straight to the point but don’t try to hide the hurdles you are encountering, they are an integral part of doing business and are warning signs if something bigger is in the making.
What is in it for you: Your investors will be able to pick up on these warning signs and help you put the relevant strategies in place. Your investors have years of experience and are well connected so they will be able to point you in the right direction.
What to DO: Analyse your business regularly
We are all familiar with KPIs, we know what they are for but don’t necessarily use them. But why? It takes precious time to keep track of all KPIs and report them the right way. Frankly, it can feel tedious.
But actually, even if it takes a founder between 5 and 15 hours every month (which might seem impossible to allocate in an already extremely busy schedule) it is a key to both success and investor relations.
What is in it for you: Keeping track of your KPIs will keep you in check with your business and allow you to think ahead of any major hurdle as you will see it coming. You will be able to use your KPI analysis for both managing your business and reporting to your investors.
What to DO: Draw action plans – and communicate it
Don’t let a hurdle stop you, draw a plan to jump over it and keep your investors in the loop. This plays a large role in building your investor’s trust in you and your skills.
What is in it for you: by building trust in you and your skill you are making powerful allies. If your startup ends up failing you will keep these allies for your next one.
Also Read: Malaysia partners with global ecosystem partners to boost tech ambitions
Last but not least, if you apply the above principles, it will make it easier for you to get extra funding to grow your business further. Whether it is to get you out of a ditch, pivot your business or lift a cash-flow restraint if investors know what you are up to on a regular basis they will be more inclined to give you more money when you need it.
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The article originally appeared on Consulting Boutique
Copyright: mg7 / 123RF Stock Photo
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