It can be quite daunting, particularly for first time founders, when shareholders are introduced into the mix of stakeholders. While there is often initial elation or relief at the injection of capital, there is a parallel realisation that investor expectations need to be managed and met. Keeping shareholders on-side is a critical element of running a business to ensure continued support and confidence. So we’ve prepared a few pointers on managing communications and relationships with investors.
Get to know them and their motivations for investing. Most investors do so for a longer-term capital gain, others do so for more regular dividend payments. However, it could well be that these priorities shift over time based on changes to taxation, such as increases to Capital Gains Tax, a very real possibility in the next budget, so ensure you keep informed of such changes and formulate contingency plans to deal with them.
If investors came in under SEIS/EIS schemes, tax relief on disposals only kicks in after 3 years. Therefore, it's highly unlikely you'll get agreement for an earlier exit unless the return is very worthwhile.
The right investors can be a great source of wisdom, identify their strengths and use them as advisors or sounding boards along the way.
Be as accurate as possible with reporting, don’t overpromise or oversell, because it’s often when expectations aren’t met that problems can flair up.
Don’t hide bad news, share it, however hard.
Make time to keep investors informed and on-side because if they’ve invested early on, the chances are they’ll be with you for a while and upon exit it’s better to have unified shareholders agree to the sale. It’s never nice to enforce drag along clauses.
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