How to Maintain Investor Relations?
How to Maintain Investor Relations?
Investors play an important role in current times. Although, they are not active in day to day working, they surely have an influence over the operations of the business. Investors provide funds to startups in exchange for capital appreciation and they ensure that the startups remain functional if they have the vision of growth and success. Similarly, for well-established businesses, investors are a source of finance in exchange for a share of the business.
Investor relations is the segment of the business whose job is to maintain good relations with the current as well as potential investors. In a startup, the advisors or business planners usually scout for investors and maintain investor relations. In a well-established business, there is a separate department that handles investor communication and relationship management.
The aim of maintaining investor relations is to make informed decisions by private and institutional investors who are planning to or have invested in the business.
Investor relations ensure that a true and fair presentation of the business model and financial projections is communicated. This helps the investors in determining whether the business is a good investment or not. Investor Relations (IR) are a sub-part of Public Relations (PR) involving communication and relationship management with shareholders, investors, and overall, the financial community.
Startups usually focus on their operations and core business. Their advisors are those who take up the responsibility of maintaining investor relations in order to close their funding deal. A bad investor relationship management would lead to withdrawal of funding chances and eventually the closure of the startup.
Large Companies normally start building their IR departments before going public. During this pre-initial public offering (IPO) phase, IR departments can help establish corporate governance, conduct internal financial audits, and start communicating with potential IPO investors.
Why Investors Relations is needed?
Advisors or IR Team is typically tasked with coordinating shareholder meetings and press conferences, releasing financial data, leading financial analyst briefings, publishing reports to the authorities and handling the public side of any financial crisis. Unlike other parts of public relations (PR)-driven departments, IR departments are required to be tightly integrated with a company's accounting department, legal department, and executive management team, such as the chief executive officer (CEO), chief operating officer (COO), and chief financial officer (CFO).
Thelargest role is its interactions with investment analysts or fund houses who provide public opinion on the company as an investment opportunity. These opinions influence the overall investment community, and it is the IR department's job to manage analysts' expectations.
How to maintain Good Investor Relations?
While scouting for an investor:
- Integrity about the business and its financials:
The pitch deck and financial model should be realistic and viable. The start-up should have the resources and skills to achieve those expectations. An investor would always look out for businesses that are true to their self and to them. The advisors should ensure that the start-ups don’t push in their higher goals just for the sake of getting funds. A potential investor can become a permanent part of the business.
Maintaining relations is all about how well can you communicate your idea to the audience. Here, the start-ups usually have an unorganized process in the beginning. The advisor’s role is effectively converting this raw data into information that will be useful for the investor to make a decision.
Once the investor has made the decision to fund your project:
- Keeping the investors up to date:
Relationships with investors should be ongoing. They are just as invested in your company's success as you are. It goes without saying that you should be proactive in building solid, harmonious investor relations.The rationale behind engaging investors from the moment they show an interest in your business is easy to understand. They are likely to be your first stop during subsequent funding rounds. The more investors know you, the greater the likelihood that they will come to your aid when you make your next pitch.
- Make your passion and mission known:
Investors are unanimous in their claim that they seek passionate and tenacious founders. You want to convince your investors that you have it in you to lead your company to its envisioned mission. The easiest way is to simply communicate what you wish to achieve and boost their confidence in your ability as a leader and visionary.
- Keep them in the loop:
Investors will never interfere in the day-to-day operations of your company. They will expect to you to lead independently without constantly relying on them for direction. However, they still want to know what's going on and how your venture is coming along. Where necessary, they may step in to provide guidance or help you out of a tough spot.
Needless to say, maintaining a synergistic relationship with your investors isn't very different from any other important business relationship with partners or clients. Respectful communication and a dynamic attitude areessentials to managing good investor relations.
Investor’s relation is a continuous process. Whether it’s a start-up or a well-established, this operation of maintaining relations with investors cannot be neglected.