Do you have an investor engagement strategy? Lacking one could damage your reputation, scalability, and profit margins.
The old paradigm for investor management was passive and included minimal communication. The information flow was one-way, companies disseminating information but not seeking input.
The situation has shifted.
Modern investors are business partners. They’re eager to get involved, share their perspectives, and support company growth.
How do you accommodate this demand? By shifting your approach towards investors.
Join us to learn why investor engagement matters and how to do it right. We cover everything you need to know to keep the financiers involved and the company thriving.
Understanding investor engagement
Investor engagement is the ongoing interaction between a business and its investors. It encompasses:
- Building and maintaining relationships with shareholders;
- Updating them on the company’s performance;
- Addressing their ideas, concerns, and questions.
Engagement also involves environmental, social, and governance (ESG) issues. It lets companies survive and thrive in the long term.
Engaging shareholders can take many formats, including meetings, calls, presentations, and proxy materials. Some businesses go beyond direct communication. They establish a website, forum, or social media account for their shareholders.
Why investor engagement matters
Investor engagement matters because it improves long-term company performance. Here’s how:
- Increasing investor loyalty: Transparent and timely information builds confidence, which translates to long-term support.
- Gaining capital: Informed investors stick around and provide (increased) funds when needed.
- Improving market perception: Building a transparent image makes your company attractive to shareholders.
- Adding a fresh perspective: Companies that turn inward are vulnerable to business pitfalls. Investors’ questions and concerns let you proactively address risk points.
5 parts of a successful investor engagement strategy
A meeting during the proxy season might’ve been enough a decade ago, but not anymore. We have many ways to connect and communicate, and your investors expect you to use them.
But having your financiers at every staff meeting isn’t ideal, either.
How do you find the middle point?
By devising an investor engagement strategy. The details may vary, but these five elements comprise any successful plan.
1. Timing: Know when to connect
The law requires at least one annual general meeting (AGM) between a company and its shareholders. But you should see your investors more often.
When should you get in touch? Any schedule works as long as it’s regular.
Here’s an example of sustainable frequency that ensures backers are well-informed:
- Monthly/quarterly performance reports: Routine reporting is your best bet. Devise a template with your investors to understand what they wish to learn and when.
- Meetings in times of major decisions. Director appointments, product launches, and asset acquisition decisions require consultations. Don’t wait for the subsequent report to tell your backers about these changes.
2. Contents: Know what to communicate
All interactions with backers should have clear objectives. You want to engage them, not crush them under a stack of paperwork. It helps to adopt an investor mindset.
Relevant content for investors include:
- Financial performance: How well you generate revenue and manage your assets and liabilities.
- Strategy updates: The company’s directions, including market positioning and growth initiatives. Also include milestones, partnerships, and expansion plans.
- Corporate governance: How your company runs and which frameworks protect investor interests. Inform them about your board composition, internal controls, and hiring practices.
- ESG considerations: Have a section on environmental, social, and governance issues. Mention sustainability initiatives, social impacts, and responsible business practices.
- Expectations: Discuss your expectations for future performance. Include data about market conditions and potential risks to make your assumptions reliable.
- Shareholder value: Add information on ways your company generates long-term returns.
Another good strategy is to address the frequently asked questions in reports. That way, the answers are readily available if investors call you to seek information.
Some information should go to shareholders immediately, including financial trouble and significant changes. KPIs, achievements, plans, and roadblocks can wait for monthly or quarterly reports.
3. Outreach: Go beyond updates
Outreach means going beyond routine updates to engage with investors. It includes events and platforms for conversations about your company’s values and aims.
Outreach can happen online and offline. If possible, pairing these two approaches yields the most desirable results. Online platforms are for lower-effort interactions, and in-person events are intense and productive.
To start, leverage digital platforms and social media. Maintain an active online presence, publishing industry insights, company developments, and financial updates. Post interactive content, respond to comments, and foster discussions.
You can also use your website for content targeted at investors. For instance, white papers and industry analyses position you as a knowledgeable source. It can showcase expertise and spark discussions.
Then comes the in-person aspect: roadshows, conferences, and presentations. These allow face-to-face interactions and build investor relationships. Choose whichever format fits your company, using it to share the latest plans and ideas.
4. Messaging: Share company values
We have the when, what, and how. Now’s the time to personalize.
Communicating company values helps you maintain integrity and attract suitable investors. It puts everybody on the right page from the get-go.
First, figure out a concise, catchy way to communicate your values. Articulating them well is half the battle won.
Then integrate those values into your corporate narrative. Use storytelling techniques to describe how your values influenced your journey and successes. The investors will feel connected to the company and better understand your motivations.
Position open communication as one of your values. Seek feedback from investors through surveys to identify areas of improvement. This approach leaves a good impression on backers and shapes future engagement strategies.
You can (and should) also highlight your ethical practices. Think sustainability efforts, welfare programs, and community engagement.
Once you establish your values, integrate them into performance reports. The “value KPIs” may detail reducing carbon emissions, giving back to communities, or helping people in need.
5. Follow-up: Maintain the discussion
Follow-up means staying connected with investors and maintaining a productive dialogue. It doesn’t have to be an everyday affair, but it’s good practice to keep the conversation flowing.
Personalized follow-ups do wonders for relationship building. Some backers care about financial performance, and others focus on governance or sustainability. Ask where their priorities lie and provide updates accordingly.
You can also send follow-up data after meetings. For example, when somebody asks about talent management during Q&A. Why not mail them guidelines or have them meet your hiring board for added information?
Top tips for communicating with investors
Business owners, especially in startups, may struggle with communication. They may over- or under-share, leaving a negative impression on (potential) investors.
Talking to investors is all about honesty, openness, and timeliness. They often want regular updates and periodic conversations: nothing too intricate.
Don’t hesitate to find your voice, but rely on these rules of thumb for the best results.
Keep it concise
Some investors enjoy details but always assume they don’t until told otherwise. Don’t send them elaborate, long-form reports: it’ll only make them less likely to read them.
A successful report is no longer than two pages. It describes your main KPIs, like user numbers, customer retention, and transaction volumes. Other information worth including are milestones, recent activities, and plans.
You might create a template beforehand to avoid splaying out.
Follow the same rule for calls or real-life meetings and presentations. Cover the fundamentals in short order and save the details for the Q&A.
Share bad news ASAP
Seasoned investors aren’t strangers to failure. After all, around 20% of startups go out of business after the first year. You’re bound to face challenges, and you should promptly tell investors when you do.
Waiting to communicate struggles only makes them fester. Once you tell the backers, it could be too late to repair. Share troubles as soon as they occur to create a plan and fix things.
It’s also vital for the investors to hear about issues from you first. Discovering them through the grapevine or on social media leaves a negative impression.
Ask for help
Business owners want to project reliability and competence. Some feel that asking for advice may undermine it, so they hesitate to seek help from investors.
If this is you, we should remind you of two points. One, nobody can run a business without assistance. Two, your financiers want you to succeed and are typically happy to help.
Why not talk to them before making big business moves?
As the owner, expect the investors to add value to your company. You make the final call, but let your financial partners weigh in on the decisions. The added perspective can only benefit your business.
Entrepreneurs are an optimistic bunch, but don’t let your optimism generate exaggeration. Setting the investors’ expectations too high only leads to disappointment and credibility loss.
Be clear about the possibilities for the best results. Set a clear pathway between points A, B, and C and determine realistic timelines.
Distinguish between the facts and ideas, goals, and desires. Don’t undersell yourself, but know that overselling has worse long-term consequences.
The same goes for meeting with new investors. They ask questions about your operational, financial, and competitive vulnerabilities. You should disclose them before assuring them that the benefits outweigh the risks.
Overcoming common investor engagement challenges
The above tips are common-sense. Why don’t all companies have thriving investor relations? Because engagement culture is new, and most people don’t expect it. So they may not catch on straight away.
Here are the top strategies for smooth sailing over these rocky shores.
Backers won’t do a business much good if they don’t understand it. Even used-to-be-CEOs might struggle to grasp the specifics of an industry or company.
Investor education means providing information and resources to investors about the company. It includes business models, industry dynamics, strategic initiatives, and executive boards.
Create presentations tailored for investors and have them early in the relationship. It should include an overview of the business, strategy, and competitors. Be detailed and leave plenty of time for Q&A.
Use your channels to maintain the educational aspect. Businesses aren’t static: explaining changes as they occur lets investors have a complete picture.
Investors are people, and having a one-size-fits-all engagement approach won’t satisfy everybody. Long-term relationship building requires sprinkles of personalization.
Personalized information ensures investors receive content relevant to their holdings and interests. It increases engagement, satisfaction, and retention rates.
Gathering this information about investors can be challenging, but it’s worthwhile. It shows them your commitment to delivering value and facilitates communication. It helps you pick appropriate channels for each backer instead of shooting in the dark.
Old-hand investors may not be used to sharing their inputs with companies. The owners might also be hesitant to include dissenting opinions in their management. But the exchange of ideas is valuable.
Two-way dialogues are interactive communications between companies and investors. They let businesses understand financiers’ interests, concerns, and interactions. It may cause better decision-making and relationships.
You’ll sound like a broken record to establish a dialogue. Request feedback with every message you send out and address it once it arrives. You’ll soon build a culture where such interaction is normalized and expected.
Startups struggle with short-term investors looking to make a buck and scram. Engagement ensures you attract backers interested in the long game.
Long-term thinking emphasizes sustainable company growth. It builds durable competitive advantages and mitigates risks instead of chasing profit.
Communicate this perspective by outlining strategic visions and long-term growth options. Also, discuss your social and environmental impacts to show you plan on lasting.
A note on investor activism
Activists are investors who advocate for specific changes within a business or industry. They purchase a stake of a company and use their positions to affect decision-making.
Activists often fight environmental or social issues or challenge perceived underperformance or mismanagement. They’re excellent analysts, too. They extensively research company structure and strategy to pinpoint deficiencies.
The number of activist shareholders hit an all-time high in 2022. So, you might encounter them,
Dealing with these individuals might sound like a nightmare. It can be a growth opportunity if you do the prep work.
The first requirement is also the largest: know the ins and outs of your company. Don’t let them catch you off guard. Activists may question your every decision at meetings, so prepare the answers beforehand.
Keep your cool if you face disruptive activists. Being rude is a recipe for failure, so address them respectfully.
Regarding the long-term approach, examine things from their perspective. Organize a meeting, learn what their objectives are, and try to find a compromise. You’ll face fewer troubles if you get on the same page with them.
What if that fails, and your activists are planning for a hostile takeover? Keep your large investors informed. Have a meeting, explain the situation, and have them remain on your side.
Key takeaways: It’s all about communication
Investor engagement isn’t rocket science. It revolves around openness, consistency, and transparency. Remember these principles:
- Effective communication is essential. It lets you convey your company’s story, vision, and long-term potential to backers.
- Communication builds trust and credibility. Timely and accurate information fosters relationships and enhances investor confidence.
- Tailoring your communication helps. Investors have different knowledge and interests. Customize to address their specific needs and concerns.
- Communication goes both ways. Actively listen to investors, request feedback, and engage in discussions. It strengthens relationships and improves your business.
- Consistency and continuity are king. They prove your commitment to transparency, accountability, and long-term collaboration.
It’s high time businesses undergo this paradigm shift, so why not lead the revolution? Stay tuned to Kakadu Media for more helpful guides for modern companies.