Tuesday, September 28, 2010

Put Your Investors To Work For You

So you found the right mix of angels for your round, successful navigated around venture economics, and all the other issues associated with fund raising.

At this point, many entrepreneurs don't take proper advantage of all the value added investors they spent so much time and trouble courting.  I.e. what is the point of having one of the super angels in your round if you don't make use of her/his help and expertise?

At Mixer Labs (a company I started that was acquired by Twitter in December), I was always pleasantly surprised by how much value meeting with our various investors brought.  Just as you have an engineering team or a UX team, you should think of your investors as your investment team and find ways for them to work for you.  Below are some tips for making the most of your investment team:
  • Investors are there to help you (not for you to "update" them).  Some entrepreneurs spend way too much time meeting with each individual angel to give 1 way updates.  If you have 12 investors, and are meeting with each of them monthly it means you are wasting too much time on investor communication instead of focusing on your startup.  This obviously is not good.
  • Figure out which investors can help with what.  Some investors are much better at (or more interested in) talking about the product.  Others can help with hiring, setting company culture, business development or the like.  Ask your angels what they are good at, and what they can help with.  When the time comes to close your first employee, negotiate that business deal, or figure out the best channels by which to buy traffic, contact the right angel or investor and ask them for help.  
  • Updates should be phrased in ways that let your investors know how they can help you.   Rather then meet with all your investors regularly, the best way to keep them up to date is to send an occasional email update.  These updates could simply be "Hey, we launched our alpha, sign up here and give feedback" or for later stage companies can be monthly or quarterly emails (e.g. tied to board meetings) with an update on the business.  With each update, I would suggest having the 3-5 key asks you want from your investors.  E.g. is there a company you need an introduction to?  Some feedback on a part of the product?  A key hire you are looking for?  Ask explicitly for help with this at the beginning of the email.
  • Mini board/advisory board.  If you don't have a board, you can use 1-2 of your favorite angels as a lightweight version.  I.e. you can ask them to meet at some regular interval (e.g. every 6 weeks) to discuss some key things that are on your mind regarding the business.  You can make these slides light, but it is still worth emailing the content a few days in advance so the angels can think through the key issues.  Come prepared as you would for a board meeting - what are the top 1-3 things that are on your mind and how can they help you think these issues through?  Is it the product?  Hiring?  Distribution?  Sales cycle?  Work with your key investors to work through this.
    • Side note: You can also do this with people who are not investors - e.g. key industry people that you know/respect who can help.  In this case they can either be formal advisors or people who come in more for a one off discussion of a key topic they know a ton about.
  • Semi-annual investors all-hands.  One thing we did at Mixer Lab was to get all our investors into one room to discuss our key issues.  This is similar to the mini-board meeting described above, except we invited everyone to it.
    • This led to great group brainstorming, as various investors bounced ideas off of us and each other.
    • A side benefit is the angels get to network with one another, which they enjoyed.
  • Calendar reaching out to key investors.  When you are working heads down on your startup, you often forget to tap into your network for help.  Put a reminder on your calendar to reach out to key investors on key topics with some regularity.  You can always skip actually contacting them, but it is good to be reminded.
  • Don't be shy.  Don't worry about asking your investors for specific help.  It could be an intro to a company they know, to help close an employee, or to meet to discuss the terms of a deal you are working on.  You should be up front and ask for help where its needed - that is what they are there for.
Our investors were extremely helpful throughout our early days as a company.  Even then, I don't think we utilized them as effectively as we could have.   Hopefully the tips above will allow you to make the most of your investment team.

Any other ideas on how to make the best use of your investment team?  Please add your thoughts in the comments section.

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