Raising capital relates more to a business person to raise more than just sufficient funds to launch a new venture.
Now, once the funds have been raised, the subsequent critical phase that should be handled well revolves around an investor relationship.
Investor relations in the aftermath of fundraising determine the trajectories of the growth of the company and future funding.
1. Transparent Communication
Investors, especially the new ones who injected funds, would love to know what their money is doing and what is happening to the business. Entrepreneurs should therefore establish a communication rhythm such as a monthly or quarterly check-in update.
Take the example of Airbnb. Even after raising funds in its early stages, the founders made it a point to keep emailing their investors regularly. Updates contained user growth, revenue, and metrics associated with the product development which kept investors informed, enabling founders to establish trust and convert them into advocates and advisors for future fundraising rounds.
2. Managing Expectations
Once the capital is secured, there often is a gap between investor expectations and the ability of the company to deliver. As a founder, managing expectations is really important to avoid future friction. Investors want to see that capital is used wisely, but at the same time, they know that growth takes time. So it always has to be balanced in terms of delivering positive results and being realistic.
For example, recall what had happened with the saga of WeWork. The startup firm was raising billions of dollars when it was at its nascent stages. But the company grew too rapidly without being able to make the expected profits. Though WeWork kept on raising funds, it finally ended in public debacle as it could not meet the growth projections of the time when the funds were being raised. In this case, there is a lesson that proper management of expectations by the investors and realistic goals must be set there.
3. Investor Involvement in Strategic Decisions
An experienced investor brings along more than capital-you get networks, market insight, and of course a vested interest in your success. He can be put under pressure by being involved in key decisions or by soliciting his guidance. Slack, after its first round of funding, was regularly calling its investors to discuss growth plans and product development.
This engagement of investors not only shared the experience but made sure that the investors continued to have confidence for subsequent rounds of funding.
4. Handling Difficult Discussions
Definitely not every post-fundraising stage goes easily. Companies may continue to miss revenue projections, products might be delayed, or the competition is gaining ground. How the founders talk to investors through such setbacks can make all the difference.
Positive communication about problems and a clear plan should keep investors on board. A health insurance startup, Zenefits, found itself faced with regulatory issues that it couldn’t circumvent as the company was on a growth spree post a successful funding round.
Rather than running away from the problems, then CEO David Sacks owned up to them, communicated transparently with investors, and did definite steps to rectify the problems. That transparency helped in survival even through difficult phases from investors.
5. Other Milestones and Successes
Investors want to see progress. Whether it’s launching a product, acquiring customers, or new partnership deals, they love seeing those milestones because they’ll be excited by that investment. Win, win, big or little. That is how you remind them that the company is doing the right thing.
Uber was very careful to stress its expansion into new cities and daily customer growth after it raised its Series A round of investment. The consistent presentation of milestones not only satisfied the existing investor but also attracted new ones for subsequent rounds of funding.
Post-fundraising investor relations develop more than just an environment of informed investors; instead, there is an environment of well-managed expectations, updates of progress, and head-on challenges.
Some unique aspects are demonstrated with each case, focusing on maintaining investor relationships at Airbnb, WeWork, Slack, Zenefits, and Uber. It holds the ability to create long-term relationships with investors while forming a base for further growth through transparent, honest, and strategic communication.