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

CVCA – "The Face of Change" – Montreal

I am heading to Montreal next week for the Canadian Venture Capital Association’s annual conference. The theme this year is “The Face of Change”, and the idea is to look at what causes change in the VC and Private Equity worlds.

I am excited to be going for a few reasons. The biggest one is the fact that I have been making a lot of noise recently saying that Canadian VCs need to spend more time connecting to the startup community, and Suzie Dingwell Williams recently said the same thing, so turning down an invitation to the only national VC conference in Canada would have been a little backwards.

The other reason I want to go is to spread the word about some of the great startups that are popping up these days. We have been lagging behind on writing profiles (I know I know I know), but we are always telling people about some of the cooler ones we are seeing.

I promise to make a few posts during and after the conference with some notes on what goes on when VCs get together. (besides Scotch tastings that is!)

Will any of you be there, or in Montreal during those days/nights? (May 28th-30th). I would love to meet up.

MeshU: One day developer mini conference that rocked

This is a guest post by Chris Long, the lead developer of Well.ca and a partner in the launch of the StartupIndex.

MeshU, which took place on the day before the Mesh Conference here in Toronto, was a developer focused mini-conference with 3 streams of sessions. Each stream had a distinct focus such as: development, design and management. While the Mesh Conference is in its third year, this was the first ever MeshU, so I was curious to see how well things would go.

There was a lot of variety in attendees, with people from management, sales, and development and from varying sizes of companies in attendance. One of the biggest reasons people had for coming to MeshU was the unique lineup of speakers, especially for a Canadian conference.

After much deliberation and coin flipping, I settled on attending: Avi Bryant’s “Turning the Tables: Moving Beyond Relational Storage”, Daniel Burka’s “Iterative Design Strategies”, Alistair Croll?s ?Watch It ? How to Monitor Web Applications?, and Ryan Carson’s “How to Start Your Own Start?up”.

Avi Bryant really did change my view on relational databases. For most web applications, storing data is done with databases such as MySQL, Oracle, and Microsoft SQL. Avi challenged this and described how large web companies (Yahoo, Google, Amazon) approach this, and then described what smaller companies can possibly learn from the large companies.

The “Iterative Design Strategy” session was packed, and I ended up joining more then half the audience on the floor. Daniel Burka did not disappoint his audience, as he explored what iterative design meant to him. The example he used was the iterations of Digg’s comment system.

Alistair Croll’s powerpoint on monitoring web applications numbered 135 slides, he just had that much information. The slides covered the types of tools available for monitoring web sites and the kind of information they give. He weighed the pros and cons of every type of monitoring tool, and left everyone with an understanding of why and how they should monitor their websites.

I finished off my day with Ryan Carson?s presentation on starting/running a startup. At the end of it, I think a lot of people had the urge to apply for a job at Carsonified (they give iPhones, 30″ screens and Aeron Chair to all their employees). His ideas and comments, while not revolutionary, were still of use to a lot of people. I can summarize it in two words: “Be Friendly”.

The MeshU organizers did a good job of getting an awesome lineup of speakers, and promoting a relaxed more workshop feel to the day. I will certainly be there next year.