These 4 insider tips are key to attracting loyal investors

These 4 insider tips are key to attracting loyal investors

The views expressed by Entrepreneur contributors are their very own.

A solid network of investors is essential for any entrepreneur. These connections can open doors and write checks when you would like them most. If you do it right, investors may even proceed to support you well beyond your current enterprise. Mastering investor relations, nonetheless, is a complex process.

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Sure, there’s research that covers the basics, like making a great first impression, hitting your mark, and ensuring your investors are the right people. But there are also some hard-to-learn tips that may only be learned from an insider.

Based on my experience as a founder who generated a 200x return for his early investors and my current role as a enterprise capitalist with over 50 startup investments, I’ve learned a lot of practical tips along the way.

1. Contact investors long before you are ready

Avoid the typical rushed means of introducing investors you’ve never met before on a tight schedule. This creates a transactional feel and gives investors an easy excuse to let it go.

You must be looking to engage investors on an emotional level, where they feel like they know you personally from the get-go. To achieve this, you need to contact potential investors sooner than conventional advice suggests, even if your idea seems unpolished. Be sure to communicate that you just are not fundraising, but are trying to build a relationship before potential funding.

It may take some time to schedule meetings because there is no rush. However, if you persist, you’ll eventually have the opportunity to meet and have an honest conversation, not pressure.

Try to make two recent connections this fashion per thirty days. Over time, it will grow into a large network that you would be able to tap into when you finally need the money. When that point comes, it won’t feel like a rushed process either, and the odds might be more favorable.

At the time I used to be the founder VungleI’ve implemented this strategy in several funding rounds. At one point, I had seven competing term sheets for our $17 million Series B funding, and it only took a few text messages to get the first offer.

2. Don’t share excellent news until it’s 100% confirmed

When meeting with investors, remember to only share numbers you know you may beat. You should underpromise—and overdeliver.

It often seems that some investors have an uncanny ability to recall every detail from previous meetings. Know that investors take notes or upload their thoughts to their customer relationship management (CRM) system after each meeting.

When I meet with entrepreneurs on behalf of my enterprise capital fund, Blue Field of the CapitalI have a journal of every necessary fact a founder has ever shared with me. Sometimes I come across a founder who hypes up their business only to disappoint them later. If I see a pattern of this behavior, it might probably break my trust in the founder and make me less likely to invest. This is exactly what you would like to avoid.

It’s higher to share positive news only when it’s confirmed. Don’t put yourself in a situation where you’re forced to justify something that didn’t materialize, like a big client you didn’t land, or revenue that only grew by 50% as an alternative of 75% (when 50% is often impressive).

Another tip: Be honest about the challenges you face and seek advice from investors. Then indicate how their advice helped you overcome the obstacles. This approach increases emotional connection and builds trust.

3. Get recent investors to raise money for you

Once you’ve confirmed investors for your round, ask for introductions from at least three co-investors they’ll refer. A word of warning: make sure you have a clear verbal or written commitment before you begin looking for introductions. Otherwise, you risk putting potential investors off investing themselves, because all it takes is one skeptical investor to persuade the others.

Instead, you would like a strong reference to defend your deal. Investors will see the opportunity as risk-free when one other investor they respect has already done the due diligence and is 100% committed.

I learned this the hard way when I got here to Silicon Valley as an immigrant with virtually no ties in the U.S. I raised $2 million in seed from 30 different investors, mostly through initial commitments and investor introductions.

4. Keep your share of the investment

Unfortunately, some investors experience radio silence after investing in a company. While they need to give founders space to execute, in addition they need to update their very own investors (yes, VCs have their very own investors, generally known as LPs).

If you think that your investors need to update their LPs every quarter, you need to appreciate the importance of sending updates to your investors at least quarterly, if not monthly. Please don’t disappear with your investors!

You should all the time provide a formal written update, whether you deliver the news in person or virtually. Always start each update with key metrics resembling revenue, money balance, and money on hand. Ideally, this must be presented in an efficient format, resembling a table or charts.

Don’t force investors to read through a long update without first covering the most vital points. Otherwise, you risk losing their attention because they’ll scan your presentation for that information anyway.

When you make life easy for your investors, they appreciate the way you use and are more likely to want to proceed working with you. This is how “repeat founders” or “serial entrepreneurs” skillfully raise large amounts of cash for their next enterprise, often no matter how their previous company did.

Investors make decisions on an emotional level. By following these tips, you may build trust and manage investor relationships like a pro.

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