Financials and Cash Flow

Managing investor relationships

How can you manage the changing dynamic with your investors?

Published: April 19, 2017

Investor funding may help your business grow, but as your business evolves so will your relationship with your investors. Continual communication and relationship management are integral to maintaining collaborative relationships with your investors. But how can you ensure that your business investors and partners are working toward the same goal?

Whether you're working with individual angel investors who use their finances to help fund small businesses and start-ups, venture capitalist organizations that fund the growth of already successful companies, or friends and family supporting your business, also known as personal investors, these tips can help you keep your business relationships moving forward.

Assess communication guidelines

As you were preparing to accept funding from an investor, you most likely outlined how you would communicate business information — email, conference calls, newsletters, etc. — and how often. As your business needs shift, your communication style may also need to shift. Any changes in agreement terms or funding expectations — such as convertible notes becoming equity in the business under certain conditions — should be discussed and documented. While sending a quick email may be convenient, it may not suffice. "The investor made a decision to put their money at risk, under your control so your relationship should be one of mutual benefit and mutual conversation," says Chuck McCoy, Director of the North Texas Angel Network.

Provide updates on a regular basis

Communication with investors should include a traditional quarterly report with information such as a review of the business's operations and current financial statements including a balance sheet and detailed reports of interim income, cash flow, and capital. Separate monthly progress reports that provide details on business developments beyond what's included in a quarterly report can keep investors aware of how the business is functioning.

Communicate potential setbacks and challenges

If your business experiences an unexpected challenge, notify investors as soon as possible to explain the issue and provide potential solutions. Not only will you show them that their investment in your business is valued, but also you'll have the opportunity to solicit advice. Even if you have ideas or plans in mind, be ready to consider suggestions or solutions from your investors, especially if they have experience with a particular challenge.

Keep investors aware of opportunities

Share growth opportunities in your industry with investors if you're looking to expand your business. Your investors may be able to provide insight that can help you take advantage of an opportunity, or they may have peers who could be interested in investing, as well. "A key investor could introduce you to potential customers, potential strategic partners, and potential investors, so those should be ongoing conversations," McCoy says.

Build a lasting relationship

Communication and a collaborative partnership with other businesses can set the stage for a relationship that continues into new business opportunities. “If another company acquires your company and investors get a pay day appropriate for the risk they took, then they may be willing to invest in your next company,” McCoy says.

Prepare for separation

If your business were to shut down before your investors are fully paid or you're looking to buy out an investor, your stockholder purchase agreement should define how parties have agreed to part ways. Make sure you also set terms in the stockholder agreement for the cash-out value of your business in case your investor wants to part ways. Having one or more candid discussions with your investor will help ensure that your relationship ends amicably.

Your relationship with your investors may change over time, but with strong communication and trust, you'll likely be able to continue a collaborative business partnership for years to come.