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How to Best Position Yourself for Access to Follow-on Capital

How to Best Position Yourself for Access to Follow-on Capital

Congrats! You’ve successfully raised an angel round and are ready to focus on company growth. You’re hiring and development is in the works, and milestones are staring you in the face. Life is busy.

But before you go any further, consider adding one more item to your perpetual to-do list: the on-going management of existing investor relationships.

Clear benefits of developing these relationships include access to follow-on capital, on-call mentorship, and key introductions to potential clients to name a few. If you fail to connect with your new partners, you can kiss those advantages goodbye.

With over fifty companies in our group’s portfolio, I’ve witnessed situations where founders capitalize on their investor relationships and others who struggle to do so. And there’s usually a clear delineation between the two groups for the level of investor interest that remains post initial raise.

If your angel investors are aware of general business performance and the direction your company is headed, it’s much easier (and more exciting) for them to continue supporting your growth.

Building meaningful relationships with your angel investors doesn’t have to take a lot of time or energy. Consider these easy steps as you figure out your approach.

Three steps to building meaningful investor relationships

1. Communicate.

We’ve all heard it before, relationships struggle when communication breaks down. While typically a two-way street, founders need to take the lead here. Your angel investors want to hear from you and they want to know how they can help.

Prioritize sending investor updates

Make this an easy process for yourself. The more complicated it is, the less frequent you’ll do it. Here are a few tips to consider:

  • Be consistent. Pick a timing cadence (monthly or quarterly) and stick to it. Add a recurring block on your calendar so that you make the time to do it.

 

  • Find a platform that works for you. Many options are available to simplify this exact process. The most basic format (which works perfectly fine) is sending an email. Some founders prefer to use a marketing or sales engagement platform like MailChimp or ClearSlide. If you already use Carta for tracking company ownership, you might like their investor update templates. Or check out Reportedly, currently in beta and free for users (at the time of publication). Other options are available, these happen to be the ones used most frequently by our portfolio companies.

 

  • Provide details. Being vague is not helpful and not worth your time. Areas to provide updates on include: sales, marketing, product, customers, team, expenses, and fundraising. Make the information easy to read and digest; investors are busy people too and appreciate brevity.

 

  • Include financials. Ultimately investors want to understand your revenue traction, expected sales in the pipeline, and how long you can stay afloat. You can achieve this by including historical financials and a pro forma or attaching your balance sheet and P&L. However you choose, make it easy for investors to connect the dots.

 

  • Always include an “ask.” Your angel investors want to help, but it isn’t their job to figure out how. Make it easy on them and specifically list what you need. Asking for “an introduction to companies X, Y, and Z” is more actionable than “an introduction to potential customers.”

 

  • Limit surprises. A benefit to providing frequent communication is that there are rarely major revelations to investors. However, life happens and so do surprises. Share information immediately and be responsive to questions.

2. Be open to feedback.

Let’s be honest for a second — does anyone really like criticism? My guess is no. Receiving feedback isn’t easy; hearing what the other side has to say is even harder.

There’s no difference when it comes to investors and your company. Many will share advice, concerns, or recommendations on how you can make improvements. Just remember: they share because they care. These early investors made a bet by funding your business because they had confidence in you. They wanted to assume the risk with part ownership of your company based on their optimism for potential upside.

Don’t let their interest in providing help escape you. It’s not a personal attack and shouldn’t be perceived that way. Many angel investors have likely walked in similar shoes at some point along their way, and want to help you avoid the mishaps they took. Sure, they have money on the line and are looking out for their investments. However, your company is likely one of many investments they’ve made. Be appreciative of the time and energy they are giving you.

If you’ve raised a round or two from angels, you likely have something to the tune of 10–20 investors on your cap table. Take a look at the diversity of experience and backgrounds they offer. It’s likely much wider than you expect. Need help matching your financials to key SaaS metrics? Struggling with the right enterprise sales pitch? Uncertain how to structure employee benefits as your team grows? Use the amazing list of resources you have at your fingertips and seek out advice. Just be ready to hear the feedback.

3. Be yourself (and be available)

Angels invest in entrepreneurs. Without founders, companies/products wouldn’t exist.

After a little time in the ring, many angel investors know within the first meeting with a founder if they are going to invest. Sure, it may take a few extra meetings or phone calls to get a final commitment. But most likely they made their decision to say “yes” during your initial pitch.

First impressions matter and your investors liked what they saw. Continue to be personable and cut the formality. Keep your communication approach consistent and just be yourself. That’s who they invested in.

On that note — actually make yourself available to your investors. Answer their calls and respond to their emails. It’s that easy.

Keep them on your side

Asa founder, you have a never-ending list of relationships to manage: employees, co-founders, users, customers, partners, advisors, etc. No one will argue it takes time and effort — both of which you likely are running low on.

Consider utilizing content that is already being created for other internal uses. Product demos, marketing material, and user engagement scores all contain information that would help your angels stay in-the-know. Simply include with your investor updates for on-going education and engagement.

Our group has taken a pretty hard stance against allowing portfolio companies to pitch for follow-on capital if the founder went silent post initial raise. While done so unintentionally, we ultimately landed at that position purely based on repetitive situations where founders couldn’t drum up follow-on interest. And the reasoning was always the same: no communication.

Just remember angel investors want the best for you and your company and are more than willing to help along the way. You already did the heavy lifting once by selling them; now focus on keeping them on your side.

And please avoid falling into the trap of pushing your early investors out of sight, out of mind. By the time you realize you need them again, it will likely be too late.


Disclaimer: The opinions expressed do not necessarily reflect those of the Nebraska Angels organization or its members.

The original article appeared first on Medium

Photo by Pavan Trikutam on Unsplash

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