How and how often should I communicate with my investors?
You’ve honed your business plan, you’ve implemented systems and processes, you’ve pitched (and pitched, and pitched again) to prospective financial partners. You’re finally fully funded, but now you face a new problem: Your investors need to stay briefed on the business.
What’s the best way to communicate with your supporters, and how frequently should they receive updates?
This question has come up countless times with our clients over the years, and we’ve learned a thing or two about what works (and what doesn’t).
We share the most common themes and recommendations for using communication as a tool to strengthen your relationships with those who believe most in your business.
Redefine the owner-stakeholder relationship
Many small business owners view their relationship with investors as akin to a principal-student connection.
The investor is the expert, and they’re in charge. As the small business owner, you report to them and keep them happy.
This is a misperception that often feeds communication challenges in the founder-investor partnership.
Stop thinking of your relationship in hierarchical terms and instead approach your stakeholders as peers. In doing so, you remove a lot of the pressure to tell them what they want to hear. Instead, you’ll be able to freely tell them the truth.
Keep in mind that stakeholders have more to offer than just money. If they invested in your company, it means they inherently like something about your business.
Your stakeholders want you to succeed. Furthermore, most of them understand that all companies face hurdles. But they can’t help you if they don’t know you need help.
Easily consumable and consistent communication is key
You’re an investor in an innovative and exciting startup. After buying equity in the company, you receive frequent updates in the early months. But then the communication starts to peter out. You hear nothing for a few months. Then, out of the blue, you receive a twenty-page, jargon-rich and data-heavy report on a Friday afternoon.
Nobody likes homework. Especially your stakeholders. Investors are busy people who don’t have the time (or necessarily the desire) to dive deep into the nitty-gritty of your business.
Instead, consider sending shorter,more frequent updates. Think about the readability of the information you’re sending. Is it written in layman’s terms? Is it skimmable?
When investors hear from you regularly, they’re less likely to react negatively to bad news. This is because they have enough information to understand the bigger picture, and because your bad news is delivered before it becomes catastrophic.
We’ve heard a shockingly high number of stories from investors who’ve essentially been ghosted by a company they’ve bought into, only to be surprised — after months of silence — with a request for a bridge loan.
Ultimately, communication is about transparency, which means sometimes you’ll need to report back on problems. Don’t let that intimidate you. Instead, view the situation as an opportunity to share your problem-solving skills and turn a negative into a positive.
When in doubt, just ask!
At the end of the day, every company (and every investor) is different. Therefore, no generic advice can take the place of direct feedback.
The best way to know how to communicate with your investors is simply to ask. Remember, they’re not the school principal. They’re your peer. Ask them:
- How they want to receive information
- When they want to hear from you and how often
- How much detail they prefer in briefings
- Which specific areas are of interest to them
One final word of warning: If you don’t want to know, don’t ask. Soliciting feedback sets an expectation that you’ll use their input. So if you’re going to ask about communication preferences with your stakeholders, it’s crucial that you also deliver.
This article is based on an episode of the WTFAQ Podcast. Get straightforward answers to all your startup questions from Wiss CPA Matthew Barbieri.