Strong investor relations give investors confidence in a Start-up’s ability to deliver on commitments, create value, and drive investability at every stage of the journey to exit. Like anything worthwhile, IR will favor those who start early.
What is Investor Relations?
Investor relations involve the consistent and accurate reporting of a company’s vision, values, direction, performance, and corporate governance to its shareholders.
Private company investments are illiquid, even if the median holding time of private equity assets continues to decline. Private equity investors demand regular, transparent reports from portfolio companies.
What is the value of Investor Relations?
IR is an opportunity for Start-ups to ensure long-term value creation. Here are five ways that IR practices make Start-ups more attractive, resilient, and profitable.
1. Differentiate your Start-up with VCs
Start-ups must contend for the mental real estate of venture capital investors, who can have dozens of portfolio companies and receive thousands of pitches per month.
While some Start-ups have highly engaged business angels, most venture capitalists will only give so much attention to any individual company.
When a founder takes a proactive approach to investor relations they capture shareholder focus. It’s hard to forget about a company that invites two-way communication, simplifies access to corporate information, and sends an investor newsletter.
Rapid shifts to ESG investing by Limited Partner’s may not always reflect at VC Fund level, but listed equities prove that ESG credentials build sustainable profitability. Start-ups who build good governance early can shorten fundraising due diligence and meet ESG terms in their shareholder agreement.
2. Maintain Alignment
As VC investors perform due diligence on potential investments, so companies should perform their own due diligence.
Once investors and founders agree to venture together, investor relations ensures accountability.A clearly communicated company vision provides context for every decision and sets the tone for shareholder meetings.
Start-ups may have few shareholders initially but can ultimately have complexity capital tables. The needs and motives of shareholders will be different, strong communication and performance create alignment.
3. Demonstrate Discipline
When you’re entrenched in day-to-day operations and the pursuit of growth, sometimes you can’t see the forest for the trees.
IR is an opportunity for founders to keep track of their business strategy, funding, capital table and corporate governance. It forces essential contextualization with the bigger picture and investor commitments.
Ongoing IR ensures well-briefed investors who understand your value and goals, making it easier and faster to secure support when opportunities and challenges inevitably emerge.
4. Attract Funding
A company that demonstrates strong IR will attract investors throughout its lifecycle.
Investors often share data and syndicate deals, but they’re only going to showcase investments that demonstrate value. When you create vocal champions through your investor relations, more investors will want to join the journey, that can boost deal sizes and valuations
Ongoing IR matters too. A strong company brand, commitment to a vision, and runway will attract talent and clients – driving investability even higher. Building sustainable relationships creates this virtuous cycle of opportunity and value creation.
5. Build Towards an Exit
Exit may feel far away when starting a venture, but private equity investors need to understand your goals and funding strategy for every stage of the journey.
It’s easy to get off track once the work begins, Start-ups that emphasize the roadmap are more likely to reach the finish line.
When shareholders see you working hard and progressing towards your exit strategy, this creates a compelling narrative and increases the chance of them committing resources to make the event a reality. When investor relations are poor, it casts doubt on the ability to deliver.
Investor Relations Solutions
Building strong investor relations lays the foundation for a Start-up’s future and helps founders stay the course – but where to start?
One way for Start-ups to align with investors is through a monthly newsletter. Newsletters update shareholders on product developments, sales, marketing, and key performance indicators, giving context when metrics fail to tell the entire story.
Creating a Eurostep Digital newsletter is an easy and affordable way for Start-up founders to engage with compelling messages tailored to the needs of investors, helping you stand out today and raise funds for growth.
Sign up today or request a demo risk-free.