How often should I be talking to investors?
Happy Wednesday,
Today’s newsletter is about how to manage investor connections and relationship building when you are not fundraising.
Let’s be honest. Fundraising will take up all of your time and energy if you don’t draw boundaries around it.
This week, we had a couple of investors host a session called “Deal Room.” During this session, founders learn about how investors work, their processes, and what they expect to see from founders. We do this for each of our founder cohorts. The more you understand the process and how investors think, the more equipped you will be to make good decisions about how to spend your time on this task.
At Deal Room, there were a lot of questions about when and how to engage with investors. Below is a summary of my learnings from our Investor Deal Room, and how you can apply them to improve and manage your investor relationships.
What’s the best time to engage investors?
The best time to engage with investors is when you have a reason for engaging with them. Either you are fundraising, or you are intentionally information gathering about their fund.
If you are taking investor meetings before you are fundraising, make it clear what you are hoping to accomplish. A great outcome could be “We want to understand what it would take for you to invest in our company” or “We want to understand where you are benchmarking good traction for our market.”
It’s best not to engage with investors on an ongoing basis. You have a company to build! And it’s super important to stay heads down on growing the business. The more you grow the business, the more attractive you will be to investors - so don’t take your eyes off the prize.
If you are taking early relationship-building calls, a great way to use the time is to understand how they invest.
There are a couple of key things that are helpful to ask when you are building relationships with investors. For example:
Does the fund lead or follow investments? If they follow, how much do they typically need to see committed before following on? Are there funds they usually co-invest with?
What would need to be true for them to be interested in your company?
What would a successful return from a company look like in their fund?
What do they see as their differentiator as a VC - other than capital? What do they bring to the table for founders?
Once you are armed with all this information, add it to your CRM* (check out the footnote for a deal if you don't have one). The best way to keep the relationship going is to send investor updates. The best frequency to send investor updates is quarterly. You can send more frequently if there are significant updates like a big new client or a fundraising process. Here is what you should include in those quarterly updates:
A one-liner reminder of what the company does
An overview of the market you are tackling and the customer profile
Key metrics with an explanation of how they relate to the business: In this section, it’s important to include:
Month-over-month growth
Pipeline projected revenue
MRR
Cash on Hand
Monthly Burn
If you close a big new customer or launch a new product feature, don’t just list it. Explain what it means for the business. What is it allowing you to unlock? Part of what investors are looking to see is how you think and how well you understand the business.
Asks: Investors, especially if they are interested in writing you a check in the future, want to help. The more specific you can be with your asks, the better - if you want an introduction to a company or you have a job you are hiring for, include them in your updates.
Investor updates that are easy to digest will be the most effective at keeping investors up to date on your building journey. Be mindful of sending quantitative updates that prove you are getting significant momentum.
If you are sending regular investor updates, you can include your fundraising timeline as part of the updates. This helps investors know when to follow up with you. When you are ready to fundraise, start by reaching out to investors who have been getting your updates. In today’s market, you might need to take upwards of 50 meetings before securing a lead. The more focus you have, and the more investors you have been nurturing through updates, the easier it will be to get your round done 🚀
If this was helpful to you, spread the love by forwarding it to a founder friend or two.
See you next time!
Dani
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