22 Jun 5 Steps to creating strong investor relationships ahead of a capital raise
For many businesses and entrepreneurs, funding is a key ingredient to their growth and success. However, investors aren’t just investing in an idea, they’re investing in you. It’s important to establish strong business relationships before you start raising actual funds and maintain this level of openness and honesty throughout your business journey.
Here are just 5 steps you can take to help you first create strong investor relationships, and then nurture it.
Think of creating these relationships in such a way they will remain whether the person invests or not.
1. Find a common interest
There are plenty of investors with money ready to be spent, however the key is to find investors that share a common interest with what it is your business is trying to achieve. The benefits for this are two-fold; firstly, it will be easier to strike up a conversation with them if you’ve never met them before; secondly; they are more likely to invest in your business, or point you in the direction of someone that will, if they care about your business values. At this stage, the conversation should be informative – you’re not going in to ask for money, you’re going in to create a foundation and presence built on your shared values.
2. Ask for advice
Once you have identified investors from your field of interest, you should use this opportunity to ask them for advice. After all, they are the subject experts and have probably worked or invested in your area of business before. Elevate them to a position of authority. By asking intriguing questions and being truly engaged in the subject matter, you are building a level of trust and respect. Moreover, if you subtly express your current needs, i.e. funds to grow, the investor who now trusts and respects you could very well offer to help you. If not, you’ve just scored yourself some great advice and secured a connection with someone, who in the future could be a great ally.
3. Create an honest relationship
Once an investor shows interest in your venture, it is important to hold a very open and clear dialogue with them because although the investor is not running the business, they are certainly an important part of its makeup. Listen to their underlying concerns with an open-mind and be prepared to work to rectify any serious issues or concerns. Learn the risks your investor is willing to take and what their core values are so you can understand how to work with them, while staying true to your own values.
4. Set clear expectations at the beginning
You and the investor need to be on the same page of your business’ vision, the scale of growth and your potential exit plans from day one. This way you both know the key milestones that you’re working towards and what you can expect for the business.
5. Keep them in the know
The investor does not need to know every single activity that is happening in the business, but you should be regularly updating them with any positive progress. This should be things like new partnerships, exciting deals or exceptional customers. Small wins build a stronger team spirit and the investors trust in your ability to be successful. Additionally, you should also be sharing any significant bad news with the investor – this will help them plan accordingly and you can work together to adjust your strategies to make improvements.
It also means you’ll have a lot less interference in your day-to-day running of the business.
Building strong relationships with your investor is key to your success as you will develop a level of mutual trust and work together to reach your desired business goals.