The importance of investor relations cannot be overstated. Keeping your investors happy, and on your side is crucial to business success – and it’s not just about making them money. Here’s why:
- You’re likely to seek follow-on investment
Most companies need multiple cash injections and therefore funding rounds, before they reach maturity. And your current investors are the most likely to invest again – if you maintain a good relationship. However, that if you ask any business angel for their biggest gripe, they’ll tell you that it’s being treated as if they’re an ATM. If they only ever hear from you when you have the begging bowl out, the chances of them participating in follow-on rounds decreases significantly.
The investment community is a small one
The investment community is – like any society – built on relationships and reputation. If you’ve treated your investors badly, they’re going to talk about it. This will damage your brand, your integrity and your chances of raising money in the future.
It reflects on your brand
Many, investors, particularly ‘crowd’ investors, invest in companies because they identify with the brand and its ideology; they are not just investing, they are joining a brand that they care about. These kinds of investors are also your biggest cheerleaders. If you don’t keep them informed, they will quickly start to feel like they don’t matter to you and, day by day, your biggest champions will fall out of love with you – and your brand.
- They’ll be the first to help you
A 2018 British Business Bank survey stated that 39% of angels invest in a start-up to contribute their knowledge and experience in that sector. So, if your business is struggling, don’t hide it from them; chances are, they’ll be able, and willing, to help.
- It prepares your business for exit
When the time comes to exit, the due diligence conducted by a potential buyer will be incredibly thorough. The practice of providing regular updates to investors - via an IR tool - will enable you to be properly prepared. With everything about your business – from the ugly reports to the beautiful sales results - in one place.
- Go digital
The easiest way to look after your investors is to go digital; Envestry for Scale-ups, for example, offers everything you need to keep your investors happy, including a secure data room and a Q&A facility. Even if you decide to go it alone, ensure that you have a dedicated IR section on your website – which can be password protected – having all the relevant information in one place shows how much you value them.
- Be upfront, honest and consistent
Steven M Bragg, author of the Investor Relations Guidebook, says ‘The worst way to release bad news is to bury it in the footnotes, in the hope that no one will see it. A diligent investor always reads them and won’t appreciate having to dig deep to uncover potentially critical information.’
It’s easy to make the Shareholder’s Report – particularly if it’s not as healthy as you’d like – less of a blow if you add a personal touch… Chocolate company Ombar often sends their investors a few bars alongside their Shareholders’ Report – it’s a small gesture that can make a big difference.
Ombar demonstrating great IR
- Reach out to your investors
Good IR enables your investors to help when things are tough – the same goes for the good news: communication enables them to identify possible growth opportunities, partnerships or new business angles. Whether it’s angels or crowdfunders - if they’ve given you money, they care and it’s your duty – as part owners of your business – to keep the dialogue ongoing and mutual, so that when you need advice, an opinion, an introduction to new investors or simply to help promote a new product, you just have to ask.
By engaging in good IR you will build a great relationship with your investors and keep them on your side and rooting for you through the good times and the bad.
ABOUT THE AUTHOR
Scott Haughton is COO of Envestors. Envestors is a fintech company that connects investors and scale-up companies. With our fundraising platform Envestry for Scale-ups, companies get a personalised site to promote deals, raise finance and engage with their investors 24 hours a day, 365 days a year.
We know first-hand Envestry delivers—we’ve raised £100m+ for over 200 companies through our own private investor network.
Founded in 2004, Envestors is regulated by the FCA and has offices in the UK, the Channel Islands, the UAE and strategic partners across China.