Floww Guides

How to Build Funding Relationships

11 Mar 2022

How to Build Impactful Funding Relationships

The most important relationship you have as a founder is the one you have with your funders. Establishing relationships with potential investors is vital, but maintaining them requires commitment and sustained effort.

In the following article, we cover how you can get these relationships started on the right foot, and how you can grow them into meaningful and productive relationships that will translate into an investment over the long term.

1. Think long term

Investors are normally involved with an early-stage business for up to 10 years. For these kinds of long-term working partnerships to be successful, it is vital that founders and potential investors understand each other’s goals and, perhaps more importantly, the experience, character, and temperament of their potential business partners. Timeframes are important too. It can cause serious issues for founders and investors when one party is set on rapid growth in the next eighteen months and the other is working to achieve a long-term vision.

Tesla was founded in 2003 but didn’t see a profit until 2013 – it is now the world’s most valuable car company. Market-changing companies like Tesla need funding partners that are in it for the long haul.

Ideally, you will find and build relationships with investors that will be a “good fit” for your start-up. Having a clear sense of your vision is crucial. You should also look for any potential pitfalls in the way that your investor works, or in the way you work together. These issues may be inconvenient now but could grow into a major hindrance over time.

2. Start early

Potential investors want to feel comfortable that you will deliver on their investment. This confidence is vital, not only to secure their investment but also to maintain a healthy business-funder relationship. By setting out key deliverables from the outset, you can continually show meaningful progress at each successive interaction with potential investors. If you don’t win them over in the first pitch, this doesn’t mean you should stop working on that relationship. You are at the beginning of a long process and it’s important that potential investors stay engaged: Ultimately, you want to be at the forefront of their minds. Of course, while it is crucial to reach out, it is also important to set the right rhythm. Don’t swamp your potential investors with information, they’ll want impactful updates.

3. Keep them invested

As start-up leveraging expert and former venture capitalist David Vandegrift notes, “for better or worse, the onus of relationship development falls on the shoulders of the founder”. Consistent communication is vital to ensuring relationships with funders remain organic. It’s no good waiting until you have acute funding needs to reach out – that does not demonstrate your value to them or inspire confidence. The basis for your conversations with funders should be check-ins, rather than requests.

Potential investors should also feel listened to – and their perspective and advice are important. Asking for feedback and advice can show that you will be willing to work with them. (Though, that doesn’t mean that you should be overly flexible or lose sight of your core business story.) Even before any investments are made potential funding partners can:

  • Give you feedback on your pitch (it can always get better)
  • Point out issues with your financial models
  • Make introductions to key figures in your field

Overall, most people want to use their skills and knowledge to help others. Getting potential investors involved (where appropriate) can make for a stronger relationship with them, and a stronger knowledge base for you too.

4. Turn potential investors into evangelists

Finally, remember that investors talk to each other. Work hard to develop a clear and easy message about your business that potential investors can get excited about because they will almost certainly pass this on to other investors. Back this up with consistent delivery of clearly communicated deliverables and VCs will feel confident sharing your details with their peers. Ensuring that investors are equipped to get the word out for you is the biggest boost you can give a fledgling business.

 

In summary

Building strong relationships with potential funding partners can seem like a lot of work to add to an entrepreneur’s hectic schedule, but it is a fundamental responsibility for any serious founder. These relationships have the potential not only to raise capital but also to provide useful advice and further introductions. Remaining flexible and thoughtful about how you want to build these relationships – investing in real-time and reaching out proactively – will ensure you have a strong foundation on which to build trust.