Hello, everyone. This is Alejandro Cremades, and today we’re going to be talking about
how to build relationships with investors. Building relationships with investors is everything
because fundraising is all about trust. In today’s video, we’re going to be breaking
it down for you so that you can get good insights as to how to do it with success. With that
being said, let’s get into it. The first thing is, you want to start early.
I find that most of the entrepreneurs that I find, they wait until the last moment where
they actually need the money. You need to start early. As an entrepreneur, if you’re
building a meaningful business and if you want to build a billion-dollar business, you
want to start very early. You’re going to be fundraising 24/7 – sometimes more active
and sometimes less active, but essentially, you are always fundraising because what you’re
doing is building relationships with the people that may be jumping in to invest in you.
With this being said, even as early as having an idea on a napkin, you want to get out there,
and you want to build those relationships. You want to create that trust. Whenever you’re
ready, is this going to be a smooth transition? Is this going to be a very simple call or
meeting where it’s coming up? Even 12 months earlier – if you think that
in 12 months from now you’re going to need to raise a round of financing, then you start
building that relationship with those investors as they are entrepreneurs, entrepreneurs that
have received financing from them in the last 6 to 12 months for an introduction so that
you can start building the rapport, that relationship, and to get the door open by someone that is
already in that circle of trust, which, in this case, would be an entrepreneur of a portfolio
company of that investor. Again, start early, as soon as you think you may need that money
from that investor in the future. Do what you say. That’s a really big one
because on day one, you’re going to be meeting with that investor, and you’re going to
tell them, “We are thinking about being here. We’re thinking about, and we’re
making the promise of being here.” So, over the course of time, they’re going to see
how you’re delivering. The last thing that you want is for that follow-up meeting to
happen where you are essentially confirming that you did not deliver on your promises.
With investors, you always want to under promise and over deliver because if you meet on day
one, and you tell them that you’re here and that in three months, you’re going to
be there. Then in three months when you’re meeting with them, not only you tell them
that you accomplished this, but you actually double or triple what you promised them. I
think that’s when they’re going to get excited and they’re going to be like, “By
the way, are you looking for money? Are you looking to raise money?” That’s essentially
how you build that trust by doing what you say you’re going to do; by having that integrity
of your word and really delivering. Again, do what you are saying.
Then you also want to add value first rather than taking and taking and taking, which is
what everyone does. Do it differently. Go with adding and adding and adding. Maybe what
you can do is get to know each other and understand what they need. Maybe you can introduce them
to other entrepreneurs that are also a fit with their theses. Maybe you can send articles
to things that are relevant with some of the discussions that you’ve had that have to
do with the way that they’re seeing things about their operation or where they’re heading.
Maybe you want to give them tickets to perhaps a game. Maybe you have tickets to a game,
and you’re not planning to go. Maybe you know that investor likes that game. Maybe
you give them the tickets. Again, it’s all about adding value. Whenever you can give
such value, you should do that because they’re going to appreciate that.
This is also going to help to build that sense of friendship, which I think is very critical
because ultimately, investors in startups, specifically, invest in people. They invest
in people that they like and that they see themselves spending time with because ultimately,
these people that are going to spend a lot of time with you, especially at a board level,
helping you with defining the strategy and so forth. That’s why they really want to
make sure that they get along with the people that they’re investing in.
Then, you want to get to know them first. Before you even take the money from that investor,
remember, it’s going to be much harder to divorce from your investor than to divorce
from your husband or wife. So, you want to make sure that during this dating phase, you’re
getting to know them, and you get to see how they are and how they behave. Maybe you take
them for a coffee; you take them for lunch; you can ask the waiter to bring the wrong
order on purpose so that you can see how they behave during difficult and challenging times
because that’s what you’re going to get when your business is not performing.
And believe it or not, entrepreneurship is not a straight line. It’s always going to
be full of ups and downs. So, during the downs is where you get to see the real human being.
You really want to try to understand how that individual is during the difficult times because
when you’re on the right side of the mountain, everything is beautiful. But when you’re
on the other side of the mountain is where you get to see the real human being.
You need to have people that are going to jump in, that are going to help you, that
are going to roll up their sleeves, and that they’re going to do whatever it takes to
turn things around rather than treating you as a write-off because remember, that if they
treat you as a write-off, that’s going to send a negative signal to the market. A write-off
basically is that they’re not going to reinvest in your business.
Even if you need the money, they would not reinvest because they don’t see a future,
and that’s a signal that they’re sending to the market, and others are going to see
that. Then they will be like, “Hold on. This is an existing investor. They’re not
investing. There’s something wrong with the business.” At that point is when they
leave your business to die. So, with that being said, make sure that you’re
getting someone onboard that you get to know first, that you get to see during tough times,
as well. You can even ask them to make an introduction to an entrepreneur that has failed
that they have invested in so that that can tell you how they were during those difficult
times. Then, if you’re comfortable with what you’re hearing and what you’re seeing,
then you go ahead, and you proceed. Celebrate together with the investor. Maybe
you’re hitting a milestone. Maybe you’re on the press. Maybe you get a new hire on
the team. You want to be up to speed catching up with the investor, take them out for a
drink, whatever that is so that you are building that friendship, that trust, that they get
to be part of your business because, at the end of the day, that investor is not only
investing in you, they are investing to help you in building the business. So you want
them to be part of those celebrations of those victories. Then, again, you’re pushing it
smoothly toward their making an investment. You also need to be ready to share the tough
things. Part of building that trust and that relationship is not just sharing how beautiful
everything is. Especially with people that are investing for the first time or that are
already existing investors, you always want to be upfront about some of the challenges
that you’re doing. Ask them for their advice; ask them for their feedback because investors
are not stupid. They know that there are good things and bad things always.
But if you go out, and you seek their advice, and they see that you’re coachable and that
you’re listening, that’s going to be an absolute plus for them to say, “You know
what? This entrepreneur is listening. They’re coachable. I would feel completely comfortable
and excited about helping them to build the business, and that’s where you want to take
it. So, always be authentic. Don’t be superficial. Don’t be fake. Don’t tell lies because
those are going to always come out. Next, you want to build or send regular updates
because by sending regular updates, you’re going to be keeping them up to speed. It depends
on where you’re at with the business, so the later that you are on the lifecycle of
the business, the less updates you’re going to send. It could be quarterly updates. But
the earlier that you are, it could be monthly updates. It could be weekly updates, but you
want to keep them up to speed. Especially when you’re in the fundraising
mode, you want to send them, maybe every couple of weeks, so that they’re up to speed with
everything exciting that is happening around the business. That way, when you really need
the money or when you need to close that round of financing, it’s not like a new thing
to them. They already heard about it, and they know that this is coming. That’s something
that you want to keep them up to speed with, with regular updates.
A big thing of developing those relationships with investors is by establishing trust right
off the bat. The way to do that is by getting warm introductions from people that are already
in the circle of trust of that investor. This could be accountants; it could be founders;
it could be lawyers; it could be investors that they are sitting on boards with, but
essentially people that are already working with that investor, and they know that investor
well. The best source, in my opinion, is the founders
that have received an investment from that investor that you’re looking to target in
the last 6 to 12 months because those people are already in that circle of trust. Ideally,
they’re working at a board level together. At that point, you’re going to get that
founder to make the intro, and for that, you’re going to be able to reduce the amount of time
that it takes from the first touchpoint to money in the bank. That’s going to help
you so that you don’t have to go for a long time with follow-ups and things like that
because it’s instant background relatedness, and you want to always shoot for that.
I’d love to hear on the comment section below how you’re thinking about developing
the relationship with your own investors or with future investors. Also, Like this video
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live Q&As, templates, agreements, a community of founders all over the world helping each
other, and I think that you’ll see great value in the fundraising training. With that
being said, thank you so much for watching.