Building Trust With Investors: Honesty, Still The Best Policy


An open and honest discussion with your investors about what is happening with your startup is a good start to a trusting and lasting relationship. While most people worry that telling investors about what happens behind closed doors might breed doubt about the company’s capabilities – or worse, have them withdraw their investment – there is still an advantage to be gained by keeping them in the loop. 

Aside from that, If you’re working together to develop anything, you want to be on the same page, which necessitates transparency and communication. You must be honest about the difficulties you are experiencing.

Why is it important to have honest and open communication with your investors?

An entrepreneur-investor relationship doesn’t begin and end when you get investors to collaborate with your business. When it comes to securing the capital for your business, right after funding is given is not the right moment to take a break. They expect to see the funds be put to good use as quickly as possible. You need to deliver on your promises after the venture capital rounds are through. And never forget to keep investors updated on your progress.

Transparency regarding your experiences does not make you appear to be a failure, but rather a responsible entrepreneur. In addition, it makes you more human and easier to communicate with.

What will you gain from establishing transparency with your investors?

Transparency is more important than anything else when it comes to building trust. Your partners will get more comfortable with each other and also with you, the more honest you are in your personal or business relationships. It’s the same with your investors. The courage to share difficult truths is the most telling sign of honesty and respect. It’s a win-win situation for everyone when trust is built.

Additionally, if you show your investors that you are willing to seek help when needed, they will be more inclined to extend their help to you.  

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Tips on how to have an honest and open discussion with your investors:

Know your Investors

Even before you start searching for funding, asking advice from other investors at an early stage might help provide useful input. You never know, they might even be the one who invests in you in the end. 

To build a trustworthy connection, it’s important to get to know someone from the get-go. You have to find some common ground to establish rapport and camaraderie. Just like an investor should know the startup they are supporting, a startup should know the investor from whom they receive funds. 

Remember the 3 C’s of communication: clear, concise, and consistent

Just like you, your investors probably have a lot on their plate. And the main objective of communication is to be understood. 

Remember to exercise the 3 C’s of communication. Be clear on what you want your investors to know. Do not oversell, even if you want to impress them. Remember that your goal is to have open and honest communication with your investors. 

Use concise language. Focus on short and direct phrases when communicating. Saying less causes you to focus, and the more focused you are, the more likely you are to get your point over to others. Ensure that you communicate in a consistent manner. Make it a point to communicate on a regular basis. Depending on the project or scenario, this may entail developing a regular communication plan to deliver updates. Also, it may simply mean being proactive in how you respond to emails, phone calls, and face-to-face interactions.

Boost investor relations by providing relevant information 

Investors want to see a variety of things, such as new items or improvements to existing products or services, but they don’t want you to lose their money. Ultimately, they are concerned with the expansion and success of your company.

You should keep in mind that investors are looking for well-organised, responsible, and transparent entrepreneurs. Give them updates by being clear, concise, and consistent.

Provide them with the most essential information first, so they know what to expect. ey performance indicators(KPIs) will be on their radar. Three to five indicators relating to profitability, progress, and customer involvement should be included in the report. 

Stay on top of all other aspects of your business and make sure they know what’s going on. Make sure that you promote new hires, fresh marketing, media releases, and other exciting developments to get people excited about your company’s future. It is also important that you let them know if you have plans on offering new items or services.

Maintain a realistic perspective 

A rising company, especially one in an innovative sector, can often tempt you to dream too big about the possibilities. Even though your startup may someday be worth billions, the reality is that 75% of venture-backed startups fail within their first five years. Hence, your well-intended attempts to convince them that they’ve invested in the next great thing may seem like an out-of-touch-with-reality mindset.

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Plan to overcome problems

When you run into a problem, let your investors know right away and let them know how you plan to fix it. As an entrepreneur, you may want to hide your head in the sand and hope that everything goes away without your investors ever finding out—but let’s face it that’s never going to happen.

What you can do is inform your investors right away if there’s a problem. If they hear that from you and not from someone else, they will have the impression that you are on top of the problem and that you are already finding ways to solve it. 

Contact investors even if progress seems slow

What if the news isn’t so good? No matter how bad or good the news is, contact your investors and inform them. When issues arise or progress is delayed, investors may feel compelled to get more active. Make the most of this chance to keep them interested. Make use of their experience and knowledge. 

Early on, pay attention to their advice and assistance. Don’t wait until things get out of hand to seek assistance. Remember, this isn’t their first rodeo; they’ve previously seen a lot of firms thrive. Many of them have undoubtedly had numerous ups and downs. They’ll almost certainly know how to get things rolling in the correct way again.

Investors know that you – as CEO of your own company – have the most insight into it, hence they expect you to update them even if you think that there are no significant changes. Your investors will appreciate the updates and they will not assume the worst. 

Connect with investors on the move

Take advantage of messaging apps. Mobile devices allow for real-time communication and updates. Aside from that, the majority of mobile devices today include a variety of applications that make it easier to view and sign papers. You may also send and receive pictures using the site’s messaging system.

It’s always preferable to be upfront about your intentions while dealing with others, especially when it comes to your investors. Investors will have more faith in you if they believe you’re being honest, pointing out your faults, and celebrating your successes. 

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