In the whirlwind of startups, founders often underestimate the impact of effective stakeholder management, particularly with investors. Understanding investor relations is crucial. The ability to communicate strategically with investors not only builds relational capital with those who may invest with you but also with existing investors to unlock the next tranche of much-needed capital. 

Investor relations (IR) is the art of cultivating a mutually beneficial relationship between a company and its shareholders, encompassing both prospective and existing investors. This symbiotic relationship is built upon effective communication, harnessing transparency and trust. The primary objective is to keep investors abreast of the company’s current performance and future strategies, fostering an environment where they can contribute feedback and pose enquiries. It’s a dynamic, two-way interaction to ensure stakeholders are well-informed and engaged in the company’s journey.

Consider the cautionary tale of Elon Musk’s 2018 tweet on taking Tesla private—a message costing both Musk and Tesla millions in fines and potential damages. It underscores the significant impact that communication can have on a business. 

Guidelines for Effective Investor Communication

1. Consistency of company updates

Start-up founders often neglect effective communication due to time constraints and constant firefighting as they grapple with running their businesses while laying down foundation processes and building teams. Farzana Baduel, CEO of Curzon PR, emphasises the importance of nurturing the investor relationship. Regular updates conveyed through concise monthly or quarterly reports are a simple yet impactful way to keep the investor community informed.  “The goal is to avoid the perception that communication only happens when more funding is needed at the 11th hour. Consistency of regular touchpoints demonstrates stability and even better if there is an element of personalisation for different investor stakeholders, as a build to the basic reporting,” according to Farzana.

2. Active listening builds trust

A prevalent misconception is viewing investors as doing a favour rather than being strategic partners. Investors are vested in the success of their investments. Frequent updates are the norm, but some investor stakeholders appreciate two-way communication; the ability to demonstrate active listening skills puts investors at ease.

3. Attention is a currency

Investors, like most stakeholders, have limited attention spans. The key is to focus on essential information and share information that has been thoughtfully adapted for the investor lens. Understanding the key metrics for investors differs depending on whether they are angel investors, family offices, private equity or institutional.  Reports should include primary Key Performance Indicators (KPIs) such as growth, active user numbers, transaction volumes, and customer retention. The report, not exceeding two pages, ensures clarity, making it easier for investors to track the startup’s evolution without being bogged down in lengthy reports. Create a two-track means to communicate summarised bite-sized information to enable skim reading and in-depth for those with a more detailed eye.

4. Humility

Founders often hesitate to seek advice, fearing it portrays weakness. However, investors are not just financiers; they are partners invested in the company’s success. Seeking counsel demonstrates humility, which echoes a mindset of continuous improvement and proactively looking out for blind spots. 

5. Transparency

The startup journey is fraught with challenges. Communicating bad news is an opportunity to build trust. Investors expect challenges and setbacks. Keeping them informed, even in times of crisis, builds trust and demonstrates transparency. In the past, about 20% of new companies didn’t survive their first year, and half of them didn’t make it past the five-year mark. Savvy investors know this, so the complete absence of negative developments may trigger suspicion.

6. Optimism

 Entrepreneurs are naturally optimistic, but their unbridled enthusiasm for the possible must be balanced with realism. Start-ups should ensure they do not turn off investors with wild assumptions and a lopsided view of cash flow projections. Exercising a balanced view and not obfuscating potential downsides will win over hearts and minds. Investors appreciate authenticity over exaggerated optimism. 

Effective communication with investors is not just necessary but an intentional and strategic investment. The partnership begins with the first pitch and extends far beyond exit strategies. By understanding the journey of the investor, their values, context and goals – start-ups will be able to establish a rhythm of investor relations which resonate and unlock access to capital for growth.

Curzon PR is a London-based PR firm working with clients globally. If you have any questions, please feel free to contact our Business Development Team [email protected]