Some business owners assume that as a private company, the concept of 'investor relations' doesn't apply to them. At least not in the way that it would if it was a public company. Crowdcube co-founder and CEO, Darren Westlake, looks at why investor relations is very much part of what a business needs to do once it has raised money.
Businesses spend a good deal of time and effort wooing investors in order to secure financial investment. But, it’s important to remember that investors are integral to a company’s future, not just for the time spent fundraising.
The people who have invested in a company have a right to know how their money is being spent and have a vested interest in seeing it being well managed. Not only that, many invest because they want to be part of a company’s future, they believe in it and want to be part of its journey. Keeping them updated is an important part of that ongoing relationship.
This year, we expect to see an increase in Series B investment opportunities for crowdfunding investors, and often it is existing investors who will go on to invest in follow-on rounds. Building a company’s credibility with these individuals from the start can go a long way in helping raise additional funds later on down the line.
Crowdfunded business can learn a lot from the way that quoted companies communicate with their investors, and so much more can be done beyond sending an annual report to shareholders and enabling A-shareholders to vote at general meetings.
A good investor relations strategy is about effective and regular dialogue between a company and its investors – both existing and potential.
First of all, it’s important to know who your existing and potential investors are.
One of the most important elements of good investor relations is to manage a database of registered shareholders and investors who have shown an interest, but not yet committed. Identify any investors you need to build a direct relationship with and keep their contact details up to date.
Next, decide what you are going to communicate to them, when and how often. Make it regular, clear, consistent and part of your business culture. Then let your investors know where they can find additional information – such as email, social media, the website or events. For anyone unfamiliar with managing investors, the following provide a good tick list to start.
Many smaller companies rely on the media to do their investor relations for them. While effective at getting your message out there, it may not be seen by all of your investors, and the messages cannot always be controlled fully. If you are sending out a press release, think about repurposing it into an investor-focused update, for example. Company news should be shared as widely as possible and investors should be top of that list.
Issue an annual review
After year-end, send an update on the company’s financial performance. This is more than just sending your annual accounts and reports. Make the accounts accessible and explain the highlights. This is an opportunity to talk about what’s been achieved and showcase some of your products, services and initiatives. Also let investors know what your prospects are for the year ahead. But make sure it is balanced.
If you have any major risks or have failed to reach a milestone, explain why and what you are doing about it. Private companies often shy away from this, but in fact it reaffirms your credibility.
Use your AGM
Consider making your annual general meeting (AGM) an event – invite investors to attend and present on the company’s progress and plans. You will also get to meet with them and get feedback.
Dedicated investor section on the website
Include details of the company’s ownership structure, board members, FAQs, details of the contact in charge of managing investor relations, investor documents, news, presentations and upcoming events. Having information that’s relevant to investors in one place shows the importance a company places on them.
Existing shareholders can be the best (and fastest) way to make introductions to potential new investors and new business connections. They are also often happy to share their knowledge and experience, becoming mentors or advisors. By talking to them, you can learn what sort of information they are looking for and how to refine your business pitch for future funding rounds.
But as well as being potential customers, your investors can be your biggest asset – they have a vested interest in your company and kept informed and engaged with the business, they are more likely to spread the word about what you are trying to achieve. Plus, as part owners of the business, you have a duty to keep them informed of the way it is performing – they may well be critical to your future growth and success.