Timely Tip for Investor Communication

I sat down at my computer late last week to begin work on my latest blog post. Since I am easily distracted, I was quick to open the incoming e-mail from a client (I’ll admit that I do leave my notify box on in Outlook, notwithstanding the sage advice of experts in time management). The e-mail contained a Q4 update on progress at his start-up venture. It was being sent out to angel investors in his seed capital financing (which includes me). What struck me about this communication—at least enough to change the topic of my post—is that this particular client does such an outstanding job of regularly communicating with his investors. This is something so few early stage entrepreneurs realize is as important as it is.

It seems like a simple concept. These people have invested their hard-earned money in your enterprise; the least you can do is keep them updated on progress, right? Incredibly, many entrepreneurs (even those with dozens of investors) fail to communicate with any regularity. Regular communication helps to ensure that nobody is surprised and that investors are ready to help out when needed (even when it means re-opening their checkbooks).

Here are my quick tips on investor relations for entrepreneurial ventures:

·       Communicate with the right level of frequency, probably at least quarterly but even more frequently when things are moving fast

·       Keep it short and hit the key points (no need to analyze the financials in MD&A fashion)

·       Don’t sugarcoat the news (although it might be good to have identified a proposed solution or plan to address any hiccups you are describing)

·       Remind investors you value more than just their money—contacts and even questions are welcome

As usual, the particular update I received last week tracked well with these tips. I really shouldn’t seem so surprised. This client has been consistent in his communication. Heck, he’s even taken the trouble to remind his first-round investors twice that the annual filing they are required to make for Minnesota Angel Tax Credit purposes must be made by February 1. His reminders even included links to the relevant forms and information.

In case you weren’t as fortunate to get a reminder, you’ve still got about a week to get your form filed (or to remind your investors to get theirs filed) without having to pay a filing fee five times greater… I guess you can thank my client (or me) for this helpful reminder.