A ten-part series exclusive to NZBusiness in which successful serial entrepreneur Mark Loveys provides a succinct ‘how to’ guide for would-be entrepreneurs – to help take your idea to the world.
PART 5. TAKING INVESTORS ALONG ON THE JOURNEY
Building a business is a journey, along which there will be all sorts of challenges, setbacks, break-throughs, victories and adventures. We, of course, all hope and plan for more good things to happen than bad things along the way – but regardless, it is always a journey and always an adventure.
Investors in your business are key stakeholders who not only deserve to be included in the journey for their financial support of your business but are also people who have a vested interest in helping you in the various ways they may be able to.
It’s harder to help a business when you don’t know what’s going on in that business.
Some investors might be able to help you far beyond solely the investment of money. They might have experience, skills, expertise, industry contacts and a different perspective that can be helpful to you and your business at various times. These investors are sometimes referred to as “Smart Money” and they need to know when and how their help might be useful to you.
One of the biggest mistakes that many start-ups make once they’ve raised some capital is to ignore their investors – until they have run out of money and urgently need more.
The dynamic of this situation is terrible, because ignored investors are generally less likely to support a business who gives them only a “bad surprise”.
Think about it from their point of view: you pitch an investment case to them, they back you with their valuable capital, they hear nothing from you for an extended time and then suddenly you are back on the scene, with bad news and/or asking for more money.
This is hardly a positive experience for them and is less likely to result in a positive outcome for you.
The best way to take your investors on the journey of your business is to communicate regularly and honestly about what is happening in the business and what your plans are going forward as things progress. Aim for continuous communication and “no surprises”, especially not “bad surprises”!
Communication strategy
For communication I recommend a regular newsletter, a quarterly shareholder report, and aim to meet in person with your investors at least once or twice throughout the year.
If your investors are directors in your company, you’ll obviously meet with them much more regularly. If you have a large number of investors, you should aim to meet with them as a group, at shareholder meetings and/or investor group meetings.
My business, Datagate Innovation, produces a monthly informational newsletter that goes to our investors, customers, prospects, partners, suppliers and anyone else interested in the business. This lets our investors see the public commercial view of the business, while the work involved in producing the newsletter also helps to nurture our commercial relationships at the same time. In addition to the monthly newsletter, we also produce a quarterly investor report that goes only to our shareholders. It has more details, including financial statements and progress updates on the various strategies we are working on.
If there is bad news or significant challenges for the business to report, this is where it should be done.
Further to the regular reports, I make it a priority to meet face-to-face with investors and/or groups of investors as much as I can, within reason. This enables more direct communication and more easily facilitates questions and answers.
It also gives you a valuable opportunity to understand your investors better and find out more about where they might be able to assist you.
It’s important to build trust and understanding with your investors and there’s no better way to do it than face-to-face meetings.
Backing the communicators
A leader of one of New Zealand’s top angel investor groups recently confirmed to me that investors have a strong tendency to back businesses that communicate the best.
Surprisingly, some very good businesses that don’t communicate with investors so well, often get overlooked by investors.
It’s well worth getting professional help with your communications, given that it’s such an important component of your business. It significantly influences your relationships with not only your investors, but also your wider customer and partner community.
In part 6, we talk about launching your product or service. This will also have a strong emphasis on communication.
Mark Loveys has been dubbed ‘one of New Zealand’s most successful serial software entrepreneurs’. He was the original developer of Exonet, the ERP software suite now called MYOB Exo, and former chairman and co-founder of Datasquirt.
As co-founder and former CEO of Enprise Group, Mark helped establish EMS-Cortex ‘cloud control panel’ software as a leading international solution and was instrumental in the sale of EMS-Cortex to Citrix in 2011. These trade sales have a combined value of more than $50 million.
Art Without Limits
