The Power of Investor Engagement: A How-to Guide for Building Strong Relationships
In the fast-paced world of venture investing, there's no denying the impact of genuine connections and strong relationships. As an investor, you understand that successful investments often go beyond financial transactions and market trends.
Building and nurturing meaningful connections with various stakeholders in the investment ecosystem can provide numerous benefits, such as access to high-quality deal flow, valuable insights, and a robust support network.
Let’s explore the different relationships investors should consider building and practical guidance on how to engage effectively.
Investor to Investor: Collaborate for Greater Success
Participating in networking events, such as industry conferences, forums, meet-ups, and strategic dinners are great opportunities to learn from experienced and like-minded investors, discover new trends, and establish potential partnerships.
85% of people prefer in-person meetings and interactions, believing they build stronger, more meaningful business relationships. Live networking is where influential relationships are often born and where your network expands by connecting with fellow investors who share your interests and values.
You know what they say: it’s not what you know but who you know. Investing in the right relationships can have incredible payoffs professionally and for your portfolio. It can mean getting the right advice when you need it, increasing your visibility and exposure in the industry, accessing reliable resources, and potentially getting in on the ground floor with new ventures.
Investor to Founder: Foster Trust and Alignment
Although founders are looking to impress investors for capital to seed their business or help them scale, they’re just as equally evaluating the partners they choose today that will affect their company’s future. It’s a mutual relationship—as an investor, you play a part in creating trust and alignment too.
Building relationships with founders and entrepreneurs benefits you in a few ways:
Access to opportunities: By establishing connections with these founders, investors can stay informed about emerging startups and potential high-growth ventures. Entrepreneurs often have unique insights into their industries and can provide you with valuable information that may not be accessible elsewhere.
Enhanced due diligence processes: Interacting with entrepreneurs on a personal level allows you to get to know their character, passion, and expertise. This firsthand knowledge can supplement traditional due diligence processes, helping you make more informed decisions.
Enables value-added support: Entrepreneurs appreciate investors who are actively engaged and bring more than capital to the table, such as relevant expertise and networks. Beyond the bottom line, value-added support can significantly contribute to the growth and success of a startup, ultimately enhancing your returns.
Facilitates long-term partnerships: Relationships with founders allow you to forge long-lasting partnerships that could extend beyond a single investment. As a startup evolves, you have the opportunity to continue to support it through subsequent funding rounds, market expansions, and other growth stages—again increasing the potential for sustained success.
Mitigate risks: Maintaining open lines of communication enables you to detect and address challenges early on, potentially reducing the impact of any adverse events.
Investor to Community: Cultivate a Supportive Environment
Community can be a broad, catch-all term, so there are a few different ways investors can engage in this sense.
Engaging with Investment Communities
Think: venture capital communities, industry associations, and online forums or memberships (hello, The51 Investor and Financial Feminist members!). Communities of like-minded individuals offer a wealth of knowledge and networking opportunities. By actively participating in these communities, attending events, and engaging in discussions, you can strengthen your network, expand your investment horizons, and access potential co-investment opportunities.
Collaborating within Industry Ecosystems
As the cornerstone of future growth, industry ecosystems are made up of interconnected stakeholders, such as startups, corporates, accelerators, and incubators. Engaging with these ecosystems can provide valuable insights into emerging trends, market dynamics, and disruptive technologies. By attending industry-specific events, workshops, and conferences to connect and collaborate with key players, you contribute to the growth of the ecosystem while gaining access to high-potential investment opportunities.
Giving Back to the Community & Impact Investing
Engaging with communities and ecosystems goes beyond financial gains. Incorporating impact investing into your portfolio strategy supports socially responsible ventures and initiatives, which women pave the way in this area: 71% of women make investing decisions with wider sustainability considerations in mind compared to 58% of men.
By aligning your investments with your values, you contribute to positive change within the ecosystem and across the globe—investing in your future, your family’s future, and the world we all want to live in.
Investor to VC Firms: Provide Value as an LP
Engaging with venture capital (VC) firms and activating your capital as a Limited Partner (LP) opens doors to a wealth of investment opportunities and valuable partnerships.
But before committing your capital, ensure you clearly understand the firm's investment focus, strategies, and portfolio companies and that their approach aligns with your investment goals, sector preferences, and risk appetite. It's also your job to conduct due diligence on the fund and its General Partners (GPs), which includes evaluating their track record, performance, and reputation to be confident about where your dollars are going.
And in this role comes an exciting collaboration opportunity to explore co-investment, where you can invest alongside them in promising ventures. A growing strategy that many LPs are adding to their portfolios—jumping from just 24% in 2021 to 71% in 2021—diversifies your portfolio and strengthens your relationship with the firm by further aligning your interests.
Maintaining regular communication and nurturing a mutually beneficial relationship with the fund can lead to valuable insights, introductions, and growing support from other LPs for the firm’s pooled funds, which can ultimately enhance its performance (and your capital investment!).
So there you have it: as an investor, you already understand that successful returns extend beyond mere financial transactions and market trends. Genuine connections and strong relationships hold undeniable significance in this industry.
With that said, we’d love to connect and welcome you into The51 community of over 23,000 strong! By connecting the nationwide movement of women accredited investors, women entrepreneurs, and the larger community of voices eager to support them, we’re powering new wealth creation and bringing about essential social change.
Our community is actively investing in innovative startups led by women and gender-diverse founders—building the Financial Feminist economy.
Whether you’re an individual investor looking to invest in women-led ventures, a family foundation or office, or institutional investor, we’d love to hear from you.
*Please note that the information provided in this blog post is for informational purposes only and should not be construed as investment or financial advice. It's important to conduct due diligence, seek professional advice, and evaluate the suitability of investment opportunities based on your individual circumstances and risk tolerance.