Make sure that your investors win!
Monday, November 19, 2007/
If you’ve raised capital, you have a responsibility to these investors. It’s not that hard, but it does require focus. Last week I interviewed Borys Chabursky from SHI Consulting based in Toronto. Borys and his partners invest in early stage companies. He made a critical point that is key to a successful relationship with your investor.
Look after them!
Most entrepreneurs are used to running their own shows. They call the shots. They decide the direction and strategy for the company. They decide on product development, operations and all other aspects of running the business.
All that changes when you take on an equity investor. That investor becomes your business partner and he will want a say in what happens in the business.
And he wants a return on his investment. OK, you know that. But what does it mean in a day-to-day practical sense.
It means that you will need to focus on making sure that your investor gets his return. It is your responsibility to keep this as your Number 1 priority. And, of course, that means having a successful company. So, what changes?
To give you an example…
A few years ago a client raised many millions to fund their growth. All good stuff. About three months in we caught up to talk about how things were progressing.
He was astounded at how much time he was spending to make sure that the investors were “happy little vegemites”. He was flying to meetings, providing a lot of reports, answering questions on the results, providing detailed financial information – and the list goes on.
If you raise capital, you will need to keep talking to your investors. That will take your time. They need to feel comfortable that all is under control. They need to feel that you are 100% open and honest in everything that you say. Keep the communication at a high level and be honest. Give them the bad news as well.
Chabursky highlighted the need for absolute integrity and honesty from all his investee companies. The slightest slip can have serious consequences.
As well, you won’t be able to “play” as much, if at all. I know lots of entrepreneurs who have interesting little side projects that they work on. And that’s lots of fun. If you take on investors they may well see those side projects as distractions. Be prepared to drop some of your fun projects. If there is no gain to the business then that project will diminish the return to the investor.
So the key point:
- It is your responsibility as the entrepreneur to do everything you can to achieve the return expected by the investor. This becomes your Number 1 priority. It will take time to manage and it will mean that you are no longer the major decision maker.
Be prepared for these changes in mindset and you will have a good relationship with your investor.
Till next time.
Gail Geronimos, is the founder of Achaeus, which helps entrepreneurs develop their businesses and she has just started a new site www.pitchingtoinvestors.com with tools and tips about how to develop killer presentations to raise capital.
To read more Gail Geronimos blogs, click here.
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