Once an entrepreneur raises equity financing from external investors, they now have brought in a new set of stakeholders — shareholders (obvious, I know).
The relationship between a business and its shareholders does not end with the exchange of capital and shares. Shareholders have taken a risk by placing a bet on you and your business, and are thus sharing in your future success or failure. This should not be taken lightly.
Communicate, communicate, communicate
As simple as it might seem, the best way to show your shareholders the respect that they deserve is by maintaining clear and open lines of communication with them. In other words, regularly keep them up to date on what’s happening with the company.
Investors hate being kept in the dark on their investments. Bad news is better than no news. Stagnating growth, roadblocks, setbacks — these happen with every business, and any investor worth their weight in salt will expect them to. If they know about them, they might be able to help. If they don’t, there is not much they can do much.
If your company has a monthly newsletter that you share with customers be sure that your shareholders are receiving it, along with a personalised message. Issue quarterly shareholder reports that take deeper dives into the status of your business. Take the time every now and then to give individual shareholders a call to update them or ask for advice.
Aside from the fact that you owe it to you shareholders to keep them in the loop, there are a number of other reasons why regularly communicating with your investors will be of benefit. Here are a couple:
First, your shareholders can be a valuable resource in terms of opening doors and solving problems. Are you having a dispute with a fellow co-founder? Shareholders can often be good mediators and help find a resolution.
Having trouble entering a new market? Tell your shareholders. Who knows ... one of them might have a useful contact there that can facilitate.
Second, your existing shareholders are likely to be your first port of call when you go to re-raise funds. If you have done a good job keeping your shareholders informed and involved with your business, the likelihood of them reinvesting is higher. Obviously this will be contingent on the development of your company, but making investors feel included is a crucial (and easy) initial step.
Regularly communicate with your shareholders. You owe it to them and they will likely be able to help your business in some way or another, even if it’s merely promoting your brand. Don’t shy away from delivering bad news. It comes with the territory.
If you’re currently running a business, best of luck. If you’re considering becoming an entrepreneur, do it. Just know that it is a very difficult, but very rewarding experience.
The writer is the co-CEO of Eureeca.com.
