in Angel Investors

Angel Financing – Investor Management

“Investor Management” is probably the area of most complaint that investor’s have about companies they are involved in. Basically the scenario typically goes something like this:

The company is pitching for funding. Throughout the pitch & due diligence process it is the number one priority of management & management takes the time to work through the funding process with prospective investors.

Upon closing, the company gets the funds & management goes about applying them to help grow the company by ramping up development, executing marketing campaigns, etc. As there are never enough hours in a day for people involved in a startup, this takes up management’s total focus in time. Investors do not hear anything.

As with any startup, things do not go exactly according to plan. Development takes longer, sales cycles take longer, etc. The original financial plan goes out the window and more money is required. Management then goes back to its investors looking for more money. Investors are lukewarm given they have been in the dark and wonder it its worth investing more of their money.

What separates the good companies from the rest are ones that appropriate manage investor relations. This boils down to 2 aspects. First, know your investors and second, establish a consistent communication channel & frequency.

As I discussed in a previous article, angels have a variety of backgrounds and motivations for funding companies. Some want to play a hands-on role in helping to grow a company, others are more passive. For the investors who are not directly involved in the company (i.e. not on the board), get to know them. In your first round of funding, you will probably have a small number of investors. Get to know their backgrounds and discuss how closely they want to be involved in helping the company. For those that do want to be involved, tap into their expertise/network when you are looking to find a supplier, get an introduction to a client, etc. As most angels are well established in their professional careers they have an enormous wealth of knowledge and expertise that can be tapped to help. If they are actively looking to be involved, it’s in everybody’s best interest to take advantage of this.

For the overall group of investor’s in the company, you should establish a regular communication mechanism and stick to it religiously. This could be something along the lines of a monthly or quarterly investor newsletter. In it, topics such as the following can be covered:

  • Sales successes
  • Sales pipeline
  • Product development updates
  • Issues & challenges
  • Up-coming events or conferences

This would be in addition to financial statements or other required deliverables as specified in the term sheet. The main thing is to establish consistency so the investors know when they can expect to receive a communication. This will help align investors to the company as it grows. Their investment makes them important stakeholders in the company and offers a pool of expertise that can be leveraged to help the company grow.

As always, if you have any questions, comments, or suggestions for future articles feel free to contact me: craig at mapleleafangels.com

15 Comments

  1. Craig –

    Great post! Fully agree. I have seen lack of communication kill a number of things now.

    What NO ONE wants (CEO or Angel) is for things to fall apart. One such recent, and very public, example was Omnidrive. See (including the comments):

    http://www.gooruze.com/members/claycook/blog/119381/My-experience-investing-in-Nik-Cubrilovic-and-Omnidrive/

    Communicate with your Angels. Set standard performance reporting mechanisms up as recommended above. If you have chosen good Angels they should have the experience and networks to help you through any issues and if not, they at least won’t be blind-sided because you haven’t told them anything was wrong!

  2. Craig –

    Great post! Fully agree. I have seen lack of communication kill a number of things now.

    What NO ONE wants (CEO or Angel) is for things to fall apart. One such recent, and very public, example was Omnidrive. See (including the comments):

    http://www.gooruze.com/members/claycook/blog/119381/My-experience-investing-in-Nik-Cubrilovic-and-Omnidrive/

    Communicate with your Angels. Set standard performance reporting mechanisms up as recommended above. If you have chosen good Angels they should have the experience and networks to help you through any issues and if not, they at least won’t be blind-sided because you haven’t told them anything was wrong!

  3. We always tell our clients to agree with their investors on what metrics they will use to measure the company’s performance against plan (as well as the progress of te market that the company is targeting). Those metrics then become the basis of management reports, to the board and to investors. The idea is to keep everyone aligned with a common investment thesis, so that it’s east to continue to support the company as needed. Want examples? Feel free to email me at [email protected]

  4. We always tell our clients to agree with their investors on what metrics they will use to measure the company’s performance against plan (as well as the progress of te market that the company is targeting). Those metrics then become the basis of management reports, to the board and to investors. The idea is to keep everyone aligned with a common investment thesis, so that it’s east to continue to support the company as needed. Want examples? Feel free to email me at [email protected]

  5. Terrific! Awesome post, someone should make this the start of a template format like this as part of a startup kit. Its really good to get everyone to focus on the key goals and metrics of the company to keep everyone aligned. Those bullets are really good examples of what our angels are after on a regular basis.

  6. Terrific! Awesome post, someone should make this the start of a template format like this as part of a startup kit. Its really good to get everyone to focus on the key goals and metrics of the company to keep everyone aligned. Those bullets are really good examples of what our angels are after on a regular basis.

  7. Each month we prepare a Flash Report for our Board which includes an update on the activities in each of the functional areas of the oraganization as well as brief financials and reporting against predetermined and agreed upon KPI’s.

    This serves two purposes for us:
    -as you detailed in your great post aligning with stakeholders is critical and no one likes surprises. I would rather over communiacte and be asked to pull back than the opposite
    -secondly, it stimulates a great discussion on what our “stuck points” are Understanding and articulating where we may be stuck allows us to ask and our stakeholders to offer to assis with relationships, areas of expertise, etc to get us “unstuck” (very technical term) and on our way

    Great post and a big beliver in communicate, communicate, communicate.

  8. Each month we prepare a Flash Report for our Board which includes an update on the activities in each of the functional areas of the oraganization as well as brief financials and reporting against predetermined and agreed upon KPI’s.

    This serves two purposes for us:
    -as you detailed in your great post aligning with stakeholders is critical and no one likes surprises. I would rather over communiacte and be asked to pull back than the opposite
    -secondly, it stimulates a great discussion on what our “stuck points” are Understanding and articulating where we may be stuck allows us to ask and our stakeholders to offer to assis with relationships, areas of expertise, etc to get us “unstuck” (very technical term) and on our way

    Great post and a big beliver in communicate, communicate, communicate.

  9. I diligently sent out email updates to my 160+ investors almost every month. The same people would ask individually for an update every 3-4 months. We discovered that no one was getting our email updates. Reason: A large Canadian ISP whose name starts with an R and ends with an S was throwing away all our “bulk sent” emails. Did not bother to tell us either. Beware – if you send “a large number” (undefined) of emails from a home email account they may be discarded. Who is the Federal Communications mInister anyway? Do we need new legislation?

  10. I diligently sent out email updates to my 160+ investors almost every month. The same people would ask individually for an update every 3-4 months. We discovered that no one was getting our email updates. Reason: A large Canadian ISP whose name starts with an R and ends with an S was throwing away all our “bulk sent” emails. Did not bother to tell us either. Beware – if you send “a large number” (undefined) of emails from a home email account they may be discarded. Who is the Federal Communications mInister anyway? Do we need new legislation?

  11. Hello,rnrn APPLY FOR A LOAN AT LOW RATE TO REFINANCE YOUR BUSINESS AND TO GET YOUR SELF OUT OF BAD CREDIT SCORE.IF INTERESTED IN THIS OFFER THEN YOU ARE TO GET BACK TO ME WITH THESE DETAILS AS LISTED:NAME=COUNTRY=AMOUNT NEEDED=PHONE NUMBER=SEX=OCCUPATION=REASON FOR THE LOAN.ON MY EMAIL [email protected] FOR MORE INFO ON THE LOAN.

  12. I like to come here, I sincerely hope here will be a place of internet communication of travelling amateur.I believe that there are many problemsfor you about travelling.But here can solve all of your problems.So I like it very much,it let me make sme friends here. Recently,I found some fashion websites, there are many things very suitable for you, go and see.The website is Nike Zoom Blur Low n

Comments are closed.

Webmentions

  • » Cram-downs and Co-investment | StartupNorth July 14, 2010

    […] Ensure there is a good investor management program in place where investors are kept apprised of the successes and failures of the […]

  • » Cram-downs and Co-investment | StartupNorth July 14, 2010

    […] Ensure there is a good investor management program in place where investors are kept apprised of the successes and failures of the […]

  • links for 2008-05-27 « National Angel Organization July 14, 2010

    […] StartupNorth » Angel Financing – Investor Management “Investor Management” is probably the area of most complaint that investor’s have about companies they are involved in. (tags: startupnorth angel investormanagement performancereporting) […]

  • links for 2008-05-27 « National Angel Organization July 14, 2010

    […] StartupNorth » Angel Financing – Investor Management ?Investor Management? is probably the area of most complaint that investor?s have about companies they are involved in. (tags: startupnorth angel investormanagement performancereporting) […]