A good investor relationship can be key for your next fundraising round
PremiumRegular updates can help you solidify your firm’s brand reputation with your investors
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PremiumBusiness leaders are perpetually flooded with calls and emails, and the juggling of calls, meetings and emails can quickly get out of hand. Likewise, finding time to update your investors on your progress can often be challenging, but effectively managing your relations with limited partners is essential to your success. Unfortunately, not every firm has the luxury of a dedicated investor relations team.
When you learn to structure your regular limited partner (LP) updates and treat these network connections as your long-lasting relationships, it will support your future fundraising efforts.
Let’s review some best practices for managing your LP and investor relationships.
Set your LP updates: Your LPs have a vested interest in your firm’s success. Still, they don’t need to see every data point you are tracking at your end. So, while you may be hyper-aware of specific details about your portfolio companies, you should talk to your investors to ensure that the information you are sharing is what they want to see.
Investor reporting can be different from company to company and even across industries, but here are some key things to gather for your next update.
KPI updates: Even though your investors aren’t looking for day-to-day, granular data, they do have a keen interest in your firm’s performance. Therefore, your key performance indicators (KPIs) should not only be your North Star metrics; they are tied directly to your investors’ goals.
Ensure that you are tracking information like portfolio companies’ valuations, the number of deals currently being evaluated and the number of deals you have closed.
You should present this information in an easily visualized and shared format. Talk to your investors to ensure that the information you are sharing is what they want to see.
Points to remember: Most investors don’t want to know everything going on in your office. So, consolidate your update to a few relevant highlights and lowlights.
A few points to include are significant award wins, major deals closure, key leadership changes, etc.
On the other side, your lowlights reporting may be related to poor-performing portfolio companies and other disappointing exits that can directly affect the potential return on investment (RoI).
An additional insight that investors are interested in is the feedback of portfolio companies. Give your portfolio companies a way to rate your work transparently. Both you and your investors will mutually benefit from clear feedback.
You can then take steps to maintain or improve your working with your portfolio companies.
Asks: This should not be part of every update you send, but your LPs need to know if you need additional support. If you need help in co-investing for an amazing opportunity, or you need warm introductions to some key decision-makers, your LP update is the perfect place to let them know.
Provide regular investor updates: Once you decide what to include in your communications with your investors, start to think about how frequently you should provide updates. A general thumb rule is to send an update with the above information every quarter.
These regular updates help you to solidify your firm’s brand reputation with your investors. If they see you as the data-driven firm that routinely updates the insights they are looking for, they will be more likely to help you raise the next funding round.
Another essential aspect of the investor relationship is maintaining the relationship over a long period.
Consider the long-term relationship: During long-term investing, relationships with LPs and GPs (general partners) can last for many years, even as roles and firms change.
A part of managing your relationship with your investors means maintaining a detailed Rolodex and be in touch with them regularly in addition to your routine updates.
GPs from smaller firms encounter challenges when it comes to forging new relationships and acquiring new funding. In general, fundraising for smaller firms is challenging, while the largest firms raise record funds.
Not every GP can appear as lucrative as Blackstone or KKR. Hence, finding ways to consistently harness your relationships with your investors, especially in a digital world, can be a key differentiator.
The strength of this long-term relationship can be the decisive factor in your next fundraising round.
Satish Patil is founder and chief executive officer of Mitibase Technologies.
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