Building Trust & Securing Funding

I was recently asked about how to secure funding for SMEs and startups.

In case you couldn’t be bothered to listen to me, the core message is this:

Finance is about moving money between people temporarily, with the expectation to reverse it, with some adjustments, at a later point in time. Facilitating this requires trust – one has to believe that they get their money back later.

One thing I didn’t cover – how to build that trust. The best tool in the arsenal from my experience is the regular update.

What are the benefits to you?

• You stand out! Very few SMEs and even startups do this regularly.
• Your meeting preparation, sending documents over, and other efforts just reduced by 50%. Imagine all the meetings you have just taking 50% less effort and being 100% more effective? That’s what regular updates help with.
• Are you uncomfortable (or bad) with pitching? Updates short-circuit the pitch process and shows that you can execute.
• The opportunity for warm introductions grows a lot – both for every person on that recipient list and for every update you send out. The surface area of luck just swells from this.

Ok, great, another miracle cure from a failed consultant. Any?practical advice?

What’s a successful update in my mind?

Structure:

An email going out covering:

• What has been done in the period (“achievements”),
• What challenges the company is facing (“roadblocks”, especially important if you expect someone in the update list to be able to help you!),
• Next planned activities.

Some other things might be important depending on your business and stage of it (such as KPI / metrics trackers, funding progress, development progress, business outreach, etc.). I’ve also seen some people very successfully add Things They Learned, or Changes Since Last Update.

Recipients:

Realistically, I think any prospective financial stakeholders should receive this. This includes, current and prospective:

• Investors.
• Bank relationship manager (if they're open to it).
• Partnering companies.
• Employees (anything that's sensitive enough to not be shared with employees you push to a board meeting or other governance function).

Frequency:

I don’t think there is a true answer to this one. And while “It Depends” is frustrating to hear, it really does, and in my experience it mostly does so based on the following:

• Are you engaged in a high-intensity activity such as fundraising, proof-of-concept, pre-release, or public testing? In this case step up the frequency.
• How frequently do you expect key information to materially change? Do you have a longer time between meaningful changes in the business? (E.g. a large development cycle, hiring cycle, or external marketing push – common amongst all of them being that the process is slow, not necessarily controllable, and potentially dependent on external factors.)
• Don’t be afraid to vary the periods. Just let people know that you will.

A good benchmark is to at least send out a monthly update, with a more substantial one every quarter to summarize what has happened during the quarter. For really intense periods - especially for early stage firms or those in rapid substantial change - I'd even recommend weekly with monthly summaries. But if you're running a smaller business with stable cash flows and few things happening, you can likely get away with quarterly.

How to do it – miscellaneous tips:

• Do it in writing. Full stop.
• Have a generic version. Send this to broad distribution. This allows you to cover a lot of ground quickly.
• For anyone who you can specifically tell you’d need help from, has contributed to an achievement or asked you to reach out to them specifically for a certain milestone – send them a personalized note after the broad update goes out. A little bit more work, but work invested rather than time spent. You are building your track record here.
• Ask recipients to share to anyone that’s relevant.
• Share this broad and wide. Your goal should be to have 10-20% of the people you send the update to request not to get it. If someone’s actively asking for your regular update, that’s a strike against you – you should be pushing it before they ask.
• Send the first update as an email. Send subsequent ones as replies to that email chain. This both helps you see what was on the last update, as well as giving that view to your recipients. New additions to your distribution list get the catalogue of updates immediately.
• Use links to documents for anything that has substantial detail or information.

How valuable are regular updates?

Here’s something – I was part of a rather unsuccessful startup nearly a decade ago, but I can still to this day draw on the connections built during that time. The main reason is the communication that those regular updates created.

Getting a business off the ground takes a village. Build yours. Effectively.