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Startup founders are responsible for many duties. — from hiring top talent, building and selling a product, fundraising, communicating with stakeholders, and everything in between.
Founders often get pulled in many directions so overlooking certain roles or duties can be easy. When done right, an investor relations strategy can take up little time every month and pay off with added help with hiring, fundraising, strategy, and more.
Related Resource: Investor Relationship Management 101
What is an investor relations strategy?
As put by the team at Investopedia, “The investor relations (IR) department is a division of a business whose job it is to provide investors with an accurate account of company affairs.”
Investor relations are typically associated with publicly traded companies to help investors make a decision to invest in a company. As you’ll notice in the definition above, they use a “division or department” whereas at a startup this is typically a department of 1 — the founder or CEO.
However, an investor relations strategy can be a lever for success for startups and privately held companies. An investor relations strategy will help founders tap into their current investors’ capital, time, network, and experience to help scale their business.
Challenges in investor relations
Building relationships with investors is easier said than done. Building a startup is full of ups and downs so approaching the individuals and firms that are invested in your business can be intimidating. Like all things related to building a business, there are some challenges when it comes to investor relations:
- Sticking to a schedule
- Sharing bad news
- Finding the right information and data to share
Learn more about overcoming these challenges in our post, The Complete Guide to Investor Reporting and Updates.
Why an investor relations strategy is crucial for startups
As we previously mentioned, keeping up with all of the roles and responsibilities can be difficult. Having an investor relations strategy is a good way to tap into your existing stakeholders to unlock help when it comes to hiring, fundraising, strategy, and more.
Builds trust and credibility
First things first, investors need to trust you and your business so you can lean into them for help with your business. Investors are a well-networked community so word will get around quickly how you communicate with investors.
Something as quick as a monthly update to existing investors, will put you ahead of the majority of startup founders and help you stand out from the pack.
Attracts and retains investors
As put by Laurel Hess, the Founder of Hampr, “Taking the time to review your business with your stakeholders is actually a really great opportunity for growth – if you view it that way, there is a ton of potential to unlock.
I have gained the following from my regular updates:
- Intros to potential investors
- Additional capital for a round I’m working on
- Intros to new verticals for expansion
- Advice on strategy for a problem we are working on
- Intros to new mentors/advisors to unlock the next phase of growth
All this for just 1 hour of my time each month? That is the definition of “no brainer.”
This 1 hour of monthly work can pay dividends when it helps to raise a new round of capital from existing investors or asking for introductions to potential investors down the road.
Helps with hiring, fundraising, and strategy
Startup investors are likely investors in 10s or 100s of other businesses and have a professional background of their own. Because of this, they are typically well-networked in the “startup world” and are able to help when it comes to hiring, fundraising, company strategy, and more.
In order to tap into their network, they need to trust you and be willing to put their reputation with their network on the line.
As put by Elizabeth Yin of Hustle Fund, “If you don’t write regular updates, your investors won’t want to help you. It’s hard to help a company and put your own social capital on the line with your network when you have no idea what is happening in your own portfolio company.”
Essential components of an investor relations strategy
An investor relations strategy will look different for every business. However, there are a few key components that most founders will benefit from including in their investor relations strategy.
Communication plan
Communication is at the core of any relationship. By sticking to a regular communication plan you’ll be able to strengthen relationships and build trust. For many early-stage founders a communication plan might look something like:
- Regular monthly updates at the start of the month
- Quarterly board meetings (in person or over Zoom)
- One-off communication and phone calls as needed
Your mission, story, and vision
Investors need to buy into your company’s mission, vision, story, and values. This is typically done during the fundraising process but it is important to continually hit on your mission and vision.
Financial reporting and disclosures
Of course, investors need to know how your business is performing. At the end of the day, if investors are not aware of your financial position and core metrics, they will not be able to help where needed. Check out the most common metrics that VCs expect from their portfolio companies below (read more here):
Investor relationship management
As we previously mentioned, investor relationship management will look different depending on the founder or investor. However, when it comes to communicating and sharing information it typically helps to include some or all of the following:
- Wins and mosses
- Key metrics
- Make specific asks
- Stay consistent
- Respond promptly
Learn more about the importance of investor relationship management in our blog, Investor Relationship Management 101: How to Manage Your Startups Interactions with Investors.
Crisis management and contingency planning
A core part of an investor relations strategy is crisis management and contingency planning. For many startups, this will come to life during board meetings. However, having a plan for how to deal with a crisis is important.
For some founders, this could be a one-off phone call to board members or the most engaged investors. It could come in the form of email, in-person meeting, etc. At the end of the day, having a plan in place for when emergencies hit is important.
Investor feedback and engagement
For an investor relations strategy to truly work, your investor needs to be engaged. An investor relationship requires work from both the founder and the investor. Sticking to a plan and regular communication schedule will lend its way to investors engaging and offering feedback.
Being pointed about where you need help and how you can help investors is a great way to spur engagement. Another pro tip is to publicly call out the investors who are going above and beyond to help your business – this will help gamify your investor relations and encourage other investors to speak up.
Related Resource: Investor Outreach Strategy: 9 Step Guide
Maximize your investor relations strategy with Visible
Visible is the home of investor relations for thousands of startup founders. Use our Updates tool to reguarly share your key qualitative and quantitative data with investors. Build relationships with potential investors using our pitch deck sharing and data room tools and ultimately keep tabs on interactions with every investor using our investor CRM.
Give Visible a free try for 14 days here.
