A good relationship with investors can be the key to your next fundraiser
Business leaders are perpetually inundated with calls and emails, and the juggling of calls, meetings and emails can quickly spiral out of control. Likewise, finding the time to update your investors on your progress can often be difficult, but managing your sponsor relationships effectively is critical to your success. Unfortunately, not all businesses have the luxury of having a dedicated investor relations team.
When you learn how to structure your regular Sponsor Updates (LPs) and treat those network connections as your lasting relationships, it will support your future fundraising efforts.
Let’s go over some of the best practices for managing your LP and investor relationships.
Define Your LP Updates: Your LPs have a vested interest in the success of your business. Still, they don’t need to see every data point that you are tracking on your end. So while you may be hyper-aware of specific details about the companies in your portfolio, you need to talk to your investors to make sure the information you are sharing is what they want to see.
Investor reports can be different from company to company and even industry to industry, but here are some key things to put together for your next update.
KPI Updates: Even if your investors aren’t looking for granular day-to-day data, they are keenly interested in how your business is performing. Therefore, your Key Performance Indicators (KPIs) shouldn’t just be your North Star metrics; they are directly linked to the objectives of your investors.
Make sure to track information like the valuations of the portfolio companies, the number of trades being valued, and the number of trades you have completed.
You should present this information in an easily viewable and shared format. Talk to your investors to make sure the information you share is what they want to see.
Points to Remember: Most investors don’t want to know everything that’s going on in your office. So, consolidate your update into a few relevant highlights and weaknesses.
A few points to include are major rewards, major deal closings, key leadership changes, etc.
On the flip side, your weak spot reports can be tied to underperforming portfolio companies and other disappointing exits that can directly affect potential return on investment (ROI).
Another insight that is of interest to investors is the feedback from portfolio companies. Give the companies in your portfolio a way to transparently evaluate your work. You and your investors will benefit from clear feedback from each other.
You can then take steps to maintain or improve your collaboration with the companies in your portfolio.
Requests: This shouldn’t be part of every update you send out, but your LPs should know if you need further assistance. If you need help co-invest in an incredible opportunity, or need warm introductions to some key decision makers, your LP Update is the perfect place to let them know.
Provide regular updates to investors: Once you’ve decided what to include in your communications with your investors, start thinking about how often you need to provide updates. A general rule of thumb is to send an update with the above information quarterly.
These regular updates help you build your company’s reputation with your investors. If they see you as the data-driven company that regularly updates the information they’re looking for, they’re more likely to help you raise the next round of funding.
Another essential aspect of the investor relationship is maintaining the relationship over a long period.
Consider the long-term relationship: When investing for the long term, relationships with LPs and GPs (general partners) can last for many years, even as roles and companies change.
Part of managing your relationship with your investors is maintaining a detailed Rolodex and being in regular contact with them in addition to your routine updates.
GPs in small businesses face challenges when it comes to forging new relationships and securing new funding. In general, fundraising for small businesses is difficult, while larger businesses raise record funds.
Not all general practitioners may seem as lucrative as Blackstone or KKR. Therefore, finding ways to consistently leverage your relationships with your investors, especially in a digital world, can be a key differentiator.
The strength of that long-term relationship can be the deciding factor in your next fundraiser.
Satish Patil is Founder and CEO of Mitibase Technologies.
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