Handling Investor Communication
As defined by the NIRI (National Investor Relations Institute), investor relations is “a strategic management responsibility that integrates finance, communication, marketing and securities law compliance to enable the most effective two-way communication between a company, the financial community, and other constituencies, which ultimately contributes to a company’s securities achieving fair valuation.” That says it all. Whether you run a startup or an established firm, whether your investors are accredited or you’re planning to approach non-accredited financing (in compliance with Title III of the JOBS Act), ensuring good ongoing communication with your investors benefits the company from all angles. It is a powerful instrument for attracting clientele and for pushing the business forward. On the opposite side, not having an investor relations system can turn your business dream into a full-blown nightmare.
Will Equity Crowdfunding Impact Investor Relations?
truCrowd expects equity crowdfunding to diversify investor relations dynamics in profound ways. For the first time in 80 years, startups will have the opportunity to raise capital from non-accredited individuals creating a whole new class of investors. These passionate supporters will entrust you with their hard earned dollars, but most likely lack the financial sophistication, education and hands-on experience of running a business. Some of them will enthusiastically pledge their money to fund your startup and cheer you on from the stands, while some might be highly vocal about expressing their opinion. With this in mind, plan a well-defined post-campaign communication plan and go into as much detail as possible on the company-investors communication terms.
Actions Speak Louder Than Money
An equity crowdfunding investor’s perception comes from a place of part-ownership pride. Unlike stockholders but much like you, the crowd investors put their hearts into the investment selections they make. They also take it upon themselves to be proactive about marketing your brand. They know that actions can speak louder than money and that they can leverage their own resources to support the investment. By using their social networks to share news about you, crowd investors can help your company succeed. Understanding this new type of investor will not sit on the side waiting for you to magically multiply their investment determines the quality of the investor relations your company will establish.
Informing the Investing Crowd about Drawbacks
In exchange for the capital raised, equity-based crowdfunding companies will deal with a totally distinctive challenge – establishing good investor relations on their own. This may seem scary when the progress of your company seems to slow down and you have to report to an investing crowd made up of 400 people, but it needn’t be. All successful companies have had their pitfalls, drawbacks and doubtful moments. Your main advantage as an equity crowdfunded business owner is that your investors won’t turn their back on you when things go astray. Let your crowd know when there’s trouble, offer one or two potential solutions and ask for their feedback. Any informed investor can handle bad news as long as they get the chance understand what’s going on and to offer their input.
After you’ve reached your crowdfunding campaign target amount, it’s time to put your own resources and their dollars to work. Naturally, you won’t be able to spend two days a week communicating with your investors, so you need to have a clear objective of what they will be informed about and when – objective stated in the post-campaign communication plan. Schedule one hour a week to cover all investor relations requests – answering questions, offering feedback, anticipating potential concerns. While outbound communication can be brief and stick strictly to the point, it can never be absent if you’re aiming to establish good investor relations – an equity crowdfunded startup challenge that, we believe, holds numerous advantages.