Whether your company needs lots of money in R&D, or can get by (in its early stages anyways) on sweat equity, you’ll have to deal with investors eventually. Although my personal experience with managing investor relationships may be lacking, us at Mission Partners understand and value the importance of investor communication because well, startups wouldn’t be able to grow and thrive without them. After a conversation with the president regarding his take on communication with investors, I have put together a marketing guide for you – not for sales, but for investments.
I’ve learned that how and when you need to communicate with investors depends on what kind of business you’re starting up. If you are starting a company which has a complicated database to build or a complex, expensive product to construct, you’re going to need to contact investors very early on in order to get the kind of funding you need to build your product. On the other hand, many startups don’t have expensive or complex products, therefore they can wait off a while on the investor search.
The first question that came to my mind while preparing for this discussion was: Why is it important to make such a large effort to communicate with investors through marketing in the first place? The answer is pretty simple: unless you do market to investors, they will never find you! Not only that, but a startup company must also build their product, price, place and promotion with investors in mind if they want to land investments once the investors have found them.
So, now the question is, how do you go about marketing with potential investors in mind? This answer varies on whether you are the business that needs investment early on or whether you are the business who can get by for a while without it. However, there are 3 key elements that are crucial for any business when communicating with the investors:
• The pitch- Know it, practice it, love it.
• Networking- you’ve got to get your name out there with some face time
• Tapping into your network- once you make contacts, it’s all about finding who’s investing, and how you can get in contact with them.
Our President said that the key to marketing to your investors is knowing when you need to. If you can hold off for a while, do it. There is no sense in spending your time and effort on marketing to investors if you don’t even need them yet! Keep your efforts focused on building your revenue stream and client basis until the day where you foresee needing capitol to fill key holes in your business or expand your team, then start marketing to investors.
If you are a business which needs capitol early on, my president advised to perfect the working model for your product to take to your investors, so they can get the best impression of your product, and your vision. Another very important step to take is to get proof of concept, get your prototype in front of people and get their input, once you’ve made your corrections, take it around to more people and make sure it is a product that a significant amount of people would be interested in buying. Nobody wants to invest in a product they don’t know people will buy right?
After this conversation I’ve learned that the major difference here between the marketing plan for the startup which needs capitol right away, and the startup which doesn’t, is the pitch. The company who needs funding early on can only present “Here’s our idea, here’s why we think it will sell, and here’s what we need to get going”. Whereas, the company who can wait a while to get funding can present “Here’s what we’ve done so far, here’s where we are looking to go, and here’s what we need to get there”. The company who can wait a while has the luxury of time to establish themselves in the marketplace and build their sales and clientele.
So, once you have networked like a champ, tapped the best contacts out of your network, and given a stellar pitch, now what? Our president said that once the money starts pouring in, the first thing to remember is that investors are not clients. You do not need to focus on “retaining their business”, but rather “managing your investor relationship”. By gaining investors, you’re not gaining more business, but you are gaining opportunity, keep that in mind. It is also crucial to keep your investors in the loop. Let them know exactly what their money is doing for you.
I hope that provides some helpful guidance and maybe even helps you on your way to getting some serious opportunities for your startup!