At its core, investment is a trust-based business. Investors entrust you with significant capital and want to ensure it will be deployed effectively toward growth and profitability. 

As a startup founder, clear and thoughtful communication with potential investors can make or break your fundraising efforts.

Without an established track record, proactive, consistent communication allows you to convey your passion, vision, business savvy, and leadership skills, while providing opportunities to illustrate your competencies and preparedness for scaling the business. 

In this article, we’ll discuss why proactive communication is critical to building positive relationships with potential investors. We’ll also cover some key aspects of your business that investors are likely to consider when deciding whether or not to invest, and how you can present your startup in the best possible light. 

The importance of building trust in a tougher market 

As we navigate a period of turbulent economic conditions, venture capital (VC) funding has seen a significant decrease compared to the previous two years of big startup bets and free-flowing capital. 

2023 saw an estimated 42% year-over-year drop in global VC funding due to a variety of factors including inflation, the war in Ukraine, and a broader economic slowdown of the startup ecosystem. This has caused investors to become hesitant to fund risky ventures and has led investors to examine startups and founders more rigorously than ever before.

However, while this increased scrutiny may seem like mostly doom and gloom for the startup landscape, it presents a unique opportunity for you to differentiate yourself and your business in the eyes of potential investors. 

These days, investors are looking beyond the business metrics of your startup, investors are also evaluating you as an individual. Investors want to get to know you on a human level – your motivations, values, and integrity. By building rapport through ongoing dialogue, you can foster meaningful relationships with investors beyond transactions, which will provide the confidence to keep backing your startup despite market jitters. 

Forging investor relationships through communication

By forging strong relationships, investors can become invaluable partners beyond just capital providers. The right investors can be indispensable sources of guidance, connection, and additional capital — making these relationships a significant competitive advantage to your business. Here are a few ways to build trust with your potential investors to maintain strong long-term relationships: 

Be radically transparent 

This one is simple: be transparent. Investors are spooked by uncertainty and have limits to their risk appetite. If they believe you are not being 100% truthful about what’s happening with your business, they will quickly lose faith. Once you’ve built rapport, you must commit to maintaining radical transparency and constant communication through the ups and downs after securing investment. To put this into context, consider this quote from Tyler Norwood of Antler: 

“If every month you send an investor what happened this month, reminding them what you’re tracking to see whether your business is working, you are within the top 10% of companies to that investor. That indicates you’re consistent, you’re disciplined, you’re objective. All those things are very hard to find. So being able to do that on a consistent basis, in my opinion, is a much more powerful indicator to investors of you as a founder than some fancy pitch deck you spent 60 hours making.”

Lean on investors’ experience, not just their funding

More than likely, potential investors are business experts who have either built or have worked with numerous successful startups in the past. This experience is incredibly valuable as they have seen startups in and out of your sector go through similar challenges. Based on this experience, you can avoid the pitfalls of previous startups and learn from their successes or failures. 

Unlock your investors’ network

As an early-stage startup founder, your network has limits. This is where your investors’ expansive networks come in handy. Your investors have spent years building up connections across various industries and domains. If you build close relationships with investors, they’re more able to put you in touch with their network. Warm introductions to aligned angel investors and VCs within your investors’ networks can help tremendously with your next round of fundraising. 

Build relationships early

As an early-stage startup founder, developing relationships with potential investors from day one should be a top priority. 

Early interactions with potential investors (even ones that don’t ultimately invest) can offer meaningful feedback and advice that can shape your business model and strategy. These conversations may also provide valuable insight into what investors look for in teams, products, and market traction, which translates into fewer surprises and unanswerable questions down the road when pitching for funding. Here are two key elements potential investors will most likely want to see in your early-stage startup:

Pitch deck 

Your investor deck is a brief visual presentation that provides investors with an overview of your company and business opportunity — summarising key information on your product, team, traction, financials, and growth potential among other touchpoints. This deck helps capture investor interest and get meetings booked. Here again, it’s crucially important to be upfront about any potential risks and challenges in the investor meetings, as failing to disclose this information could make you look dishonest in the later stages of investment. 

Need help building your investor deck? AfriFindInvest’s DeckLab service will build a clear, concise, and compelling value proposition for you to pitch to investors.

Data room 

A data room is a secure digital repository of documents that provides in-depth supporting information for your startup, including financial statements, market research, product specs, traction data, forecasts, and other sensitive details that investors look at in their due diligence process. When an investor is interested in your startup, proactively offering a robust data room with all the information they could want will show your dedication to transparency and go a long way in building trust with that investor. 

While the benefits of a data room sound great, building a large data repository can be a time-consuming and difficult task. Fortunately, AfriFindInvest offers a robust data room service that constructs an accurate, comprehensive, and objective snapshot for your investors — allowing you to turn interest into committed capital.

Conclusion

In challenging economic times, dedication to transparent and consistent communication allows you to differentiate yourself and your business while forging strong relationships with potential investors.

Furthermore, focusing on cultivating investor relationships, particularly in the early days of your startup enables you to capitalise on these indispensable sources of guidance, network connections, and access to additional capital. 

With a polished pitch deck and exhaustive data room, you’ll be perfectly positioned to demonstrate your dedication to transparency, business savvy, and investment preparedness — signaling your readiness for prime time and unlocking the funding needed to turn your startup’s vision into reality.

If you’d like to learn more about how AfriFindInvest can help you communicate and build strong relationships with potential investors, contact us today!