Nurture Key Relationships

You’re reading an excerpt of Great Founders Write, by Ben Putano, writer, entrepreneur, and book publisher. He’s the founder of Damn Gravity Media, a publishing house that inspires and educates tomorrow’s great founders. Purchase now for lifetime access to the book and on-demand video course.

How to Write to Your Investors, Stakeholders, and Biggest Champions

Mac Conwell is a developer, two-time startup founder, and venture capitalist. In 2020 he started Rarebreed Ventures, a pre-seed fund focused on underrepresented founders—female founders, minority founders, and founders living outside the main startup hubs in the US.

For all of Mac’s skills as a developer and capital allocator, his greatest strength (in my opinion) is his storytelling. As we discussed the importance of founder-investor communications, he shared this story:

“When I worked for the state of Maryland venture fund, we had a high-flying startup who had just landed a major distribution deal. Things were going great, but then we didn’t hear from them for a while. I went about my business, working other deals and such. Then one day I got an email from one of the co-founders.”

Mac seemed visibly shaken at this moment, as if he was reliving the experience while telling me the story. For an investor, surprise emails are about as welcome as kidney stones.

The email said, “Hey Mac, just thought you should know. Our CEO took another job at a marketing agency. Also, we’re out of money.”

“Just thought I should know?” Mac asked rhetorically. “Um, yeah, I think I should know!”

Mac called the co-founder within minutes of receiving the email. Apparently the company blew their budget on R&D and didn’t have enough money for production. Mac helped them acquire new capital to temporarily salvage the situation, but they continued to fall into debt and eventually went under.

“Because they spent so much time trying to solve the problem themselves, by the time they told me about it, I could no longer help them,” said Mac.

As a founder, people are betting on you to be smart and resourceful. So when a problem arises, it’s tempting to keep it quiet and try to solve it on your own. Sometimes you will, but it could also cost you your company.

Mac then shared another story with me, this time about one of his portfolio founders whose communication skills saved the company, and potentially much more.

The founder was an immigrant living in the US. One day he was met at his home by ICE agents and was taken into custody. There was a misunderstanding about his immigration status. The founder called Mac immediately:

“Hey Mac, I’m being taken away right now. Just wanted you to hear it from me and not my co-founder.”

Then he hung up.

It was a Friday. Mac had planned on a quiet weekend of work and rest, but plans had changed. He dropped everything and started making calls. Mac found a better lawyer for the founder, and they were able to clear up the confusion. The founder was released and the matter resolved by the end of the weekend.

“Had he waited to call me until Monday, the situation would’ve been completely different,” said Mac.

If you find the right investors, they will do whatever they can to help you succeed. But they aren’t mind readers. Frequent, honest communication is the foundation of a beneficial founder-investor relationship.

4 Habits of Great Relationship Builders

According to Mac, great founders share four communication habits that help them build strong relationships with their investors:

1. When in Doubt, over-Communicate

In the first story Mac shared with me, the founder suffered from a common problem: under-communication.

“Come to me with solutions, not problems,” is still the pervasive mindset in business, despite it being thoroughly debunked by organizational researchers. When times get tough, many founders and business leaders go quiet until they find a solution to share. They don’t want to look incompetent or panicky by raising the alarm.

But many founders under-communicate during good times as well. They don’t want to brag or talk about “little” wins. This is also a mistake.

“The founders that I have the best relationships with tend to be those that over-communicate. They text me. They tell me the good AND the bad, right when it happens,” said Mac.

When in doubt, the best founders over-communicate. The habit of sharing everything—good and bad—has several benefits. First, over-communication gives investors more opportunities to help you. They can only assist if they know what’s going on with you and your business. Second, over-communication saves investors from being surprised by bad news. Surprises destroy trust, and a lack of trust is the root of all relationship problems. Finally, over-communication keeps you accountable. Sharing your intentions will improve your chances of following through. Tell your investors what you’re going to do, then do it.

Is there a limit to over-communication? It’s different for every investor, but their patience is a lot higher than you might think. “As an investor, it’s my job to tell you, ‘Hey, you don’t need to text me every day. Let’s keep it to once a week unless something big happens.’” said Mac. “But even then, you could come back at me and say, ‘Don’t you want us to succeed?’ and I’ll probably let it slide.”

When in doubt, over-communicate.

2. Be Consistent

On the surface, writing consistent investor memos doesn’t seem all that important, especially if you’re already over-communicating with your investors informally.

But keeping a consistent routine is valuable for two reasons.

First, consistency is a trust-building exercise. There’s that word again: trust. If you’re organized and responsible enough to send out an email at the same time each month, you’re likely organized in all aspects of your work.

The second reason is that consistency breeds self-confidence. Much of our success is determined by our personal view of ourselves. Do you believe you’re a good leader? A strong communicator? A reliable person? The way we view ourselves is critical, and we can start to view ourselves more positively by succeeding in small ways on a consistent basis.

By being consistent with something like investor memos, you start to see yourself as a person who is consistent and reliable. This will bleed into other areas of your life and work.

This is a lesson I had to learn the hard way. After years of holding myself back with negative self-talk, I decided to try to change my habits instead of my thoughts. I committed to a daily exercise routine, which gave me confidence in every aspect of my life. It also, slowly but surely, shifted my self-talk from negative to positive.

Be consistent. Choose a manageable cadence for your investor updates and show up.

3. Share the Good, but Especially the Bad

Investors don’t want to be the last to know about good news. They’re not just financially invested in your success, but emotionally as well. Sharing your wins is a great moment for you and your biggest supporters.

But sharing bad news is far more important. When a crisis hits, start talking.

Many founders wait to tell investors about a problem until after it’s solved. This is always a mistake. There’s no guarantee you can solve the crisis on your own. We saw the tragic consequences of under-communication earlier in the chapter.

But also, you miss out on a chance to tell your adventurous story. Great startups are defined by the crises they overcome. These stories become legendary and part of the myth surrounding your company. Your investors will share your story far and wide, but only if they are part of the action.

Bottom line: keep investors in the loop as problems come and go.

4. Use Stories to Bring the Numbers to Life

We’ve talked about the power of stories throughout this book, and they are just as powerful in your investor updates.

“Whenever I write an update to my Limited Partners [the folks who invest in Rarebreed Ventures], I start with a story,” said Mac. “It’s usually about a founder we recently invested in. I share their mission, why they built the company, what makes them amazing, and why we invested. It gives my investors a much better feel for the work we’re doing. It brings the numbers to life.”

Starting investor updates with a story is a little unusual, Mac admits. Most begin with top-line and bottom-line numbers. But sharing personal stories in your investor updates can help your investors build an emotional connection not just to you, but your customers and mission.

Inspire with stories. Convince with numbers.

Great Relationships Start with You

Good communication builds trust, and trust builds relationships. This is true with your team as much as your investors. If you’ve chosen the right investors—those who bring more to the table than just money—then you want as close a relationship as possible to them.

“The more you communicate with your investors, the more value you’ll get out of them,” said Mac.

Yes, VCs have a financial incentive to see you succeed. But it’s you who needs to lead the relationship. Share your wins, losses, and challenges on a regular basis. Model the type of communication you want and that’s what you’ll receive in return.