Avoiding Costly Mistakes in Investor Relations

Avoiding Costly Mistakes in Investor Relations March 19, 2024

Investor Relations

Raising funding is no easy feat, especially for first-time founders. You need a solid business plan, traction to demonstrate market fit, and the skills to pitch effectively. Yet founders often trip up when it comes to investor relations — the ongoing communication and relationship building after that first check clears.

“We’ve seen companies make mistakes managing investors that have cost them dearly down the line,” said Michael Mohammadi, CEO and co-founder of StormX, an investor relations platform. I sat down with Mohammadi and his co-founder Eduardo Fonnegra to get their tips on avoiding common investor relation pitfalls.

Don’t Get Caught Up in Short-Term Fundraising

It’s tempting to focus on immediate fundraising needs without considering the long-term ramifications of taking on certain investors. “A lot of founders get caught up in just meeting the first couple investors who can give them money,” said Mohammadi. However, not all money is created equal.

The wrong investor partner can hurt you down the road, especially if their priorities end up misaligned with the direction you want to take the company. Make sure to evaluate investors thoroughly not just based on the size of their check, but whether they’ll be able to provide strategic advice and introductions that support your vision. With the right investor relationships, fundraising becomes a byproduct of building something great.

This tendency to prioritize short-term gains over long-term success is an example of the cognitive bias known as loss aversion. Founders are so anxious to avoid the pain of missing payroll or running out of cash in the near-term that they make hasty decisions on investors that cost them later. Being aware of this bias can help founders take a balanced perspective.

Don’t Neglect Ongoing Investor Relations

You’ve finally gotten that first investment. Time to get back to product development, right? Not so fast. Investor relations require ongoing nurturing, not just during capital raises.

“A lot of startup founders think that the only way investors will respond favorably is if they provide their best pitch on first contact,” said Mohammadi. Unfortunately, this Shark Tank-style approach often backfires. Don’t think of investor communication as a one-and-done sales job. The goal is to establish authentic relationships based on mutual understanding.

Schedule regular investor updates through calls and newsletters. Seek investor advice to strengthen your business model. And involve them in important strategic decisions as valued partners. By keeping your investors engaged and informed, you build crucial trust and support for when you eventually need to raise capital again.

Here, founders can fall prey to confirmation bias — a cognitive bias that involves seeking out information that validates their existing perspective while ignoring contradictory evidence. After landing an initial investment, founders feel confirmed that their model and pitch works. Yet neglecting ongoing investor relations undermines long-term success. Being cognizant of this bias is key.

Hone Your Messaging for Changing Markets

Markets are fickle beasts. Economic fluctuations — whether upswings or downturns — impact the types of companies investors are willing to fund. During periods of uncertainty, it’s especially critical to tailor your messaging and positioning.

“When markets get rough, founders need to reevaluate their business model and value proposition,” said Mohammadi. Demonstrate how you’re building an enduring company, not just riding a trend. Highlight how your product solves real customer pain points.

While some investors get skittish in downturns, money continues flowing into promising startups across sectors. “VCs are always looking to invest in the next revolutionary, innovative project,” said Fonnegra. Rather than following perceived “hot” areas, stick to your vision. With clear and targeted messaging, you can get funding even in tricky times.

Fix Operational Weak Spots Before Fundraising

The strength of your operations will directly impact fundraising success. “We want to see companies have all their positioning in order before connecting them with investors,” said Mohammadi.

Yet some founders rush into pitching before getting their house in order. Have your pitch deck, financials, KPI dashboards, and other materials ready for investor scrutiny. Build up marketing and sales to demonstrate traction.

Work on any weak spots in your team roster or business processes, and show scalability. The more you button up operations on the frontend, the easier fundraising becomes on the backend. Investors want to put money into startups primed for growth.

Don’t Just Focus on Fundraising

At the end of the day, fundraising is not the end goal. It’s a means to grow your business. “Too many founders focus on pitching, pitching, pitching. They need to spend more time on actual relationship building,” Mohammadi emphasized.

Rather than getting fixated on closes, think about how you can forge durable relationships with investors. Successful investor relations depend on cultivating a network that supports you during good times and bad.

Even if an investor passes, stay in touch. They may connect you with others or come back around in the future. With strong relationships, fundraising takes care of itself.

Pick Investors Who Truly Understand You

Not all investors are created equal. Beyond just capital, you want backers who grasp your vision and can provide strategic guidance. Vet potential investors thoroughly, just as they’ll be vetting you. Look for overlaps in values, priorities, and working styles. Seek warm introductions from other founders and advisors to find the best fits.

Taking the time to choose compatible investors reduces friction down the line. With investors who share your mindset and interests, you don’t have to worry about pushing your company in directions that don’t feel right.

Don’t Underestimate the Power of Community

Investor relations are undergoing a shift from a VC-centric model to community-driven funding. “I think crowdfunding and blockchain will revolutionize startup investing,” said Mohammadi.

Platforms like Republic and Wefunder make it easier than ever for founders to connect directly with customers, fans and smaller-dollar investors rather than relying solely on institutional capital.

Build an engaged community that wants to literally invest in your success. Share progress transparently, solicit input, and reward loyalty. A grassroots investor base will provide funding as well as invaluable feedback to hone your product-market fit.

Embrace Investor Relations as an Ongoing Journey

The companies with the strongest investor ties don’t view fundraising as a one-off event. They embed communication with investors as an integral ongoing component of operations. Making investor relations a habit avoids scrambling to reactively raise capital and build rapport when your back is against the wall.

Successful investor relationships are earned over time through consistent outreach and alignment on values. Maintain these connections during funding downtimes so they’re primed to move when it counts. With disciplined nurturing of your investor network, you’ll be fundraising ready no matter what the markets throw at you.


The tips above, synthesized from my in-depth conversation with StormX’s founders, provide actionable best practices to build investor relationships that fuel sustainable startup success. Avoiding missteps like focusing on short-term fundraising, neglecting ongoing communication, and not addressing operational weaknesses beforehand will pay dividends as your company matures. Investor relations are challenging but immensely rewarding when done right. With commitment and savvy relationship skills, you can secure the backing to turn your vision into reality.

Key Take-Away

Effective investor relations are crucial for long-term startup success, involving thorough investor vetting, ongoing communication, and strong community engagement…>Click to tweet


Image credit: cottonbro studio/pexels

Originally published in Disaster Avoidance Experts

Dr. Gleb Tsipursky was lauded as “Office Whisperer” and “Hybrid Expert” by The New York Times for helping leaders use hybrid work to improve retention and productivity while cutting costs. He serves as the CEO of the boutique future-of-work consultancy Disaster Avoidance Experts. Dr. Gleb wrote the first book on returning to the office and leading hybrid teams after the pandemic, his best-seller Returning to the Office and Leading Hybrid and Remote Teams: A Manual on Benchmarking to Best Practices for Competitive Advantage (Intentional Insights, 2021). He authored seven books in total, and is best know for his global bestseller, Never Go With Your Gut: How Pioneering Leaders Make the Best Decisions and Avoid Business Disasters (Career Press, 2019). His cutting-edge thought leadership was featured in over 650 articles and 550 interviews in Harvard Business Review, Forbes, Inc. Magazine, USA Today, CBS News, Fox News, Time, Business Insider, Fortune, and elsewhere. His writing was translated into Chinese, Korean, German, Russian, Polish, Spanish, French, and other languages. His expertise comes from over 20 years of consulting, coaching, and speaking and training for Fortune 500 companies from Aflac to Xerox. It also comes from over 15 years in academia as a behavioral scientist, with 8 years as a lecturer at UNC-Chapel Hill and 7 years as a professor at Ohio State. A proud Ukrainian American, Dr. Gleb lives in Columbus, Ohio. In his free time, he makes sure to spend abundant quality time with his wife to avoid his personal life turning into a disaster. Contact him at Gleb[at]DisasterAvoidanceExperts[dot]com, follow him on LinkedIn @dr-gleb-tsipursky, Twitter @gleb_tsipursky, Instagram @dr_gleb_tsipursky, Facebook @DrGlebTsipursky, Medium @dr_gleb_tsipursky, YouTube, and RSS, and get a free copy of the Assessment on Dangerous Judgment Errors in the Workplace by signing up for the free Wise Decision Maker Course at https://disasteravoidanceexperts.com/newsletter/.

About Dr. Gleb Tsipursky
Known as the Disaster Avoidance Expert, Dr. Gleb Tsipursky is on a mission to protect leaders from dangerous judgment errors known as cognitive biases, which devastate bottom lines and bring down high-flying careers. His expertise and passion is developing the most effective and profitable decision-making strategies, based on pragmatic business experience and cutting-edge behavioral economics and cognitive neuroscience, to empower leaders to avoid business disasters and maximize their bottom lines. You can learn more here https://disasteravoidanceexperts.com/glebtsipursky/ The bestselling author of several books, Dr. Tsipursky is best known for his national bestseller on avoiding disasters and achieving success in business and other life areas, The Truth Seeker’s Handbook: A Science-Based Guide. His next book, Never Go With Your Gut: How Pioneering Leaders Make the Best Decisions and Avoid Business Disasters, is forthcoming with Career Press in November 2019. It’s the first book to focus on cognitive biases in business leadership and reveal how leaders can overcome these dangerous judgment errors effectively. After that he’s publishing The Blindspots Between Us: How to Overcome Unconscious Cognitive Bias and Build Better Relationships with New Harbinger in April 2020, the first book to focus on cognitive biases in professional and personal relationships and illustrate how we can defeat these dangerous judgment errors in our relationships. See more information here https://disasteravoidanceexperts.com/author-page/ Dr. Tsipursky’s cutting-edge thought leadership was featured in over 400 articles he published and over 350 interviews he gave to popular venues that include Fast Company, CBS News, Time, Scientific American, Psychology Today, The Conversation, Business Insider, Government Executive, The Chronicle of Philanthropy, Inc. Magazine, and many others, as you can see here https://disasteravoidanceexperts.com/media/ Dr. Tsipursky's expertise comes from over 20 years of consulting, coaching, speaking, and training for businesses and nonprofits. He serves as the CEO of the boutique consulting, coaching, and training firm Disaster Avoidance Experts, which uses a proprietary methodology based on groundbreaking research to help leaders and organizations maximize their bottom lines by addressing potential threats, seizing unexpected opportunities, and resolving persistent personnel problems. His clients include Aflac, Balance Employment Assistance Provider, Edison Welding Institute, Fifth Third Bank, Honda, IBM, International Coaches Federation, Ohio Hospitals Association, National Association of Women Business Owners, Sentinel Real Estate, The Society for Human Resource Management, RealManage, The Columbus Foundation, Vistage, Wells Fargo, the World Wildlife Fund, and over a hundred others who achieve outstanding client results. You can learn more about that here: https://disasteravoidanceexperts.com/about Dr. Tsipursky also has a strong research and teaching background in behavioral economics and cognitive neuroscience with over 15 years in academia, including 7 years as a professor at the Ohio State University and before that a Fellow at the University of North Carolina-Chapel Hill. His dozens of peer-reviewed academic publications include journals such as Behavior and Social Issues, Journal of Social and Political Psychology, and International Journal of Existential Psychology and Psychotherapy. His civic service includes over 4 years as the Chair of the Board of Directors of Intentional Insights, an educational nonprofit advocating for research-based decision-making in all life areas. He also co-founded the Pro-Truth Pledge, a civic project to promote truthfulness and integrity for individual professionals and leaders in the same way that the Better Business Bureau serves as a commitment for businesses. He serves on the Advisory Board of Canonical Debate Lab and Planet Purpose, and is on the Editorial Board of the peer-reviewed journal Behavior and Social Issues. A highly in-demand international speaker, Dr. Tsipursky has over two decades of professional speaking experience across North America, Europe, and Australia. He gets top marks from audiences for his highly facilitative, interactive, and humor-filled speaking style and the way he thoroughly customizes speeches for diverse audiences. Meeting planners describe Dr. Tsipursky as "very relatable," as "a snap to work with," and as someone who "does everything that you would want a speaker to do." Drawing on best practices in adult learning, his programs address the wide spectrum of diverse learning styles, as attested by enthusiastic client testimonials and references. He regularly shares the stage with prominent leaders, for example recently speaking on a roundtable panel with the President of the European Commission Ursula von der Leyen, Secretary General of the International Federation of Red Cross and Red Crescent Societies Elhadj As Sy, Chancellor of Austria Brigitte Bierlein, CEO of Penguin Random House Markus Dohle, and billionaire philanthropist and Chair of the Bertelsmann Management Company Liz Mohn. You can learn more about his speaking and see videos here: https://disasteravoidanceexperts.com/speaking/ Dr. Tsipursky earned his PhD in the History of Behavioral Science at the University of North Carolina at Chapel Hill in 2011, his M.A. at Harvard University in 2004, and his B.A. at New York University in 2002. He lives in and travels from Columbus, OH. In his free time, he enjoys tennis, hiking, and playing with his two cats, and most importantly, he makes sure to spend abundant quality time with his wife to avoid disasters in his personal life. Learn more about him at https://DisasterAvoidanceExperts.com/GlebTsipursky, contact him at Gleb[at]DisasterAvoidanceExperts[dot]com, follow him on Instagram @dr_gleb_tsipursky and Twitter @gleb_tsipursky. Most importantly, help yourself avoid disasters and maximize success, and get a free copy of the “Assessment on Dangerous Judgment Errors in the Workplace,” by signing up for his free Wise Decision Maker Course at https:// DisasterAvoidanceExperts.com/Subscribe You can read more about the author here.
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