How New Companies Can Cultivate Investor Relationships

— April 4, 2017

As titans of industry, we don’t like to admit how much simply being in the right place at the right time contributes to success in business. We want to believe that each one of our achievements is the product of our best-laid plans, but here’s the reality: The biggest opportunities often appear out of thin air in the middle of the night.


The challenge, then, for business leaders becomes positioning themselves to benefit from that unpredictable cadence. Determining exactly where, when, and how to do that is endlessly tricky, but one great resource is consistently overlooked: investors.


There’s a tendency to think of financiers as nothing more than piggy banks; to some, “cultivating investor relationships” simply means handing someone a pen when it comes time to cut a check, but that’s a misconception that needs to be cleared up.


In practice, investors deliver value in many unexpected ways. And even when they’re not contributing to the cause, financial backers can do a lot to propel a new company forward.


Looking Past the Purse Strings


Investors are mistakenly defined just by their willingness to spend money. But here’s the thing: They got to that enviable position by being successful professionals who have experience, expertise, and hard-won insights. That’s why investor relationships have so much more to offer than a simple transfer of funds.


All new companies need to hear good advice and harsh truths in equal measure. Investors are just as adept as advisors because they’ve built their own businesses and worked closely with countless others. When it comes to engineering growth, multiplying revenue, and gaining traction, investors have a perspective that can’t be discounted.


Those investors are just as poised to help new companies make the right connections, whether those are with other shareholders, potential partners, or talent they’d like on their teams. By being plugged into specific industries, markets, and professional networks, investors can make the most valuable introductions. In some cases, the meetings they set up matter a lot more than the number of zeros attached to any check they write.


Creating Value for All


Clearly, investors offer more than just monetary value. But the question becomes “Why would investors want to nurture a new company they have little to no financial stake in?” That’s where the art of cultivating investor relationships comes in.


The goal is to make it easy for investors to contribute their time and insights. Conversely, it must be worthwhile for a striving company to dedicate resources to investors without a personal financial stake. Here are some tips to help both sides benefit from the process:


1. Keep things casual. There’s no need to throw dollar amounts out on the first meeting. The best way to start the relationship off on the right foot is to take a measured, relaxed approach to initial investor encounters.


If you’re only after advice, you don’t roll out the red carpet for an investor. Instead, propose a half-hour conversation over a cup of coffee. This assures backers that they won’t need to spend loads of time sitting through an aggressive sales pitch.


2. Find some overlap. An unfamiliar investor is much more likely to meet with you if you have a connection in common. Start working your professional network to identify points of contact with investors in your industry.


Once you’ve established a touchpoint, meet them at a ball game, a coffee shop, or a restaurant you both enjoy. An introduction is a better way to spark a conversation than a cold call, and a common interest can help smooth the transition when it’s time to talk business.


3. Don’t just take. If your relationship with an investor in purely one-sided, you can’t expect it to last for long. Look for ways to use your own connections and contracts to deliver value to the investor. Once a reciprocal relationship has been established, you become invested in one another’s success, even when no equity has been exchanged.


Any sort of relationship with an investor is better than no relationship at all. If all that’s exchanged is information, it’s still been valuable. But there’s always the potential that as a relationship continues, a hesitant investor will evolve into an enthusiastic partner.


There’s no way to know for sure exactly what kind of value an investor can offer. The smartest new companies are the ones that embrace that uncertainty — they know that success finds them as often as they find success.

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Author: Gadiel Morantes


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