Not all progress is good progress, and not all investors are as hands off as startups might prefer. When your investors start asking questions and don't like the answers, what should you do next?
Below, 12 successful entrepreneurs from the Young Entrepreneur Council (YEC) weigh in, offering advice on how to respond—and how to make sure you reach your milestones in the first place.
1. Create Clear(er) Milestones
When founders aren’t clear on their milestones, it’s not always easy for them (or their investors) to see their progress. When you create distinct milestones and raise funds accordingly, it’s easier to stay on the same page with investors and avoid these kinds of concerns.
So I’d advise founders in this situation to rethink their milestones—what do they want to achieve, by when and what do they need (in terms of resources) to hit these milestones. If you take this milestone funding approach going forward, you can avoid a lot of hassle.
When stuff gets really hard (and stuff always gets really hard), don't go into your shell. It's easy to go into your shell or your bubble and isolate yourself when people are doubting you, but that will only make matters much worse.
I'd strongly advise you to email, call and meet with your investors even more during your down time, so you can help control the narrative and show them you are on top of it all.
3. Expect It
As an entrepreneur, it's up to you to be Chief Encouragement Officer (CEO). While you are the optimist that sees things where others may not, investors may lose faith when results are poor.
Listen to them and take their advice seriously. Don't let their criticism shake your motivation to a point you can't perform. It's common for investors to go through cycles where they are in love (and out of love) with your business.
The best thing you can do is keep the relationship positive and gravitate your time and energy towards investors that will help you and your business. After all, getting things in the green again is the best way to regain their faith.
4. Tell The Truth
I've seen too many entrepreneurs who are pretty much professionals at raising capital, but amateur at running businesses, and they provide every excuse in the world to investors who have already put their money in. People are squeamish when they see a lack of progress.
So the best thing to do is tell them what is "really" going on. Why aren't you in revenue yet? What needs to happen for you to get into revenue, and what are you doing to get there? Investors who are told the truth are always five times more patient than investors who feel like they are being given the runaround or answers to simply try to appease them.
5. Carry On
Check to see if your investors are armchair rulers or if they’ve ever gotten their own hands dirty. Those who have been in the game will have a better understanding of the challenges you have to overcome on the frontlines. But people always have doubt until they see the finished product, at which point their doubt will be removed. Don't let their doubt derail you. Be brave. You have to endure these moments and carry on.
—Ty Morse, Songwhale
6. Have A Fact-Based Discussion
Investors and founders are engaging in a high-risk venture—to doubt is human. But keep the dialogue productive by hinging statements to facts and figures. Compare metrics to the previously defined goals.
If the numbers prove to be keeping pace, then it's emotional (not business) management that needs improvement. If the numbers fall short, then there's the opportunity to figure out what changes need to be made, set new goals and keep a steady flow of information about progress going forward. The doubt will never go away completely, but facts are your strongest weapons against it.
7. Address It
When someone who has a stake in your company is expressing doubt, don't ignore it, address it immediately. This is not the time to throw out ideas but rather demonstrate results, and express intentions.
Any relationship, whether it is in public relations, employee relations or investor relations needs attention and value in order to continue and prosper. Provide them with a reason to buy-in.
—Fabian Kaempfer, Chocomize
8. Get It Together
If your investors are expressing doubt, it's likely that one of two things is happening: You aren't doing a good job communicating your progress, or you really do have fundamental issues with your business.
If it's the former, you must learn how to better communicate your story. If you are confident with where you are and your plans, then find a way to communicate that clearly to your investors. If it's the latter, then this is the time you should be using your investors the most.
When you are having real, substantial issues with your business, present the facts candidly and openly to your investor base. Most have been there before and can offer valuable help. The worst eight-letter word in an investor's vocabulary is "surprise," so keep them up to date and communicate.
9. Schedule An In-Person Meeting
Schedule a face-to-face meeting with the investors, ask them to elaborate on their doubts and provide open, honest answers. Sometimes, just getting it all out in the open can ease an investor's doubts.
10. Re-Establish Credibility
Create opportunities to earn back your credibility by resetting goals and expectations within more conservative and achievable levels. Then overcommunicate your progress with increased reporting and by sharing successes and failures along the way. You are better off being conservative and outperforming than having to go back and explain once again why you didn't hit your goals.
11. Don't Get Defensive
You always need to be completely honest and transparent with your investors. By communicating openly and effectively with your investors, you can better strategize ways to solve your problem; hiding key information will only hurt you. Accept responsibility, be open to feedback and don't get defensive—every business has bumps.
12. Talk Up Your Plan And How You're Executing It
Investors are looking at long-term profitability, but there are several milestones to pass on the road to profitability. Show investors you are reaching those milestones and remind them about the market opportunity that got them excited to invest in the first place.
If you are not hitting the milestones that were outlined in your original business plan, show investors what your new course of action is to restore their confidence. Clearly articulate what has changed and how you are responding. No matter what, always show that you have a plan and that you are executing on it.