When an investor says “Yes,” that doesn’t mean you can stop communicating with them. Unfortunately, that’s often exactly what happens. Entrepreneurs will take a Yes from an investor and then proceed to shut down all communication until it’s time to close the round.
This is where many deals are lost–between the Yes and the close.
I can think of several examples where an entrepreneur had a Yes, but then lost the deal by failing to keep the investor up to date. In one instance, four months passed after an investor committed to the round. When the entrepreneur contacted him to say “Okay, we’re closing,” the investor literally replied: “Sorry, that was a long time ago. I’m not sure I remember you. Can you remind me who you are and which company this is?” Obviously, that investor had moved on to other things.
Another time, six months went by after a Yes with no communication between the company and the investor. So when they finally were ready to close, the investor told them: “Look, that was six months ago. We haven’t heard from you since then, so we assumed it wasn’t happening and we’re not planning on investing.”
After you get a Yes, do not stop communicating. Typically after an investor commits to you, a couple of months–and sometimes more–will go by before you actually close their money. Particularly in equity rounds, it can take a long time to put together syndicates. Or you might have a complex situation where there’s a lot of herding of cats. Even in the best of circumstances, some time is going to pass between the Yes and the close.
A lot can happen in a couple of months. Things change. People change their minds. Other hot deals come along. In an instant, a Yes can turn into a No. Don’t let that happen to your hard-earned Yes. Help it remain a Yes.
The key to keeping that Yes is to keep the lines of communication open. Investors sometimes change their Yes to a No based on the entrepreneur’s behavior. The way you keep an investor informed and up to date during this critical time frame is an indication of how you’ll communicate with them in the future.
That’s why it’s important to manage that relationship by continuing to let the investor know what’s going on. You should be updating them weekly, or at the very least biweekly, with a quick email. Keep them informed about your progress and the good things that are happening. Tell them about others who are committing to the round and new customers that have signed up. Let them know how much you have committed and when you’re on track to close.
Then make sure they’re responding once in a while, even just to acknowledge that they are receiving your updates.
No matter how much time it takes to put together the round, continue to develop your relationship with an investor in the weeks and months after they say Yes. And of course, after the investment too. But I’ve seen it before – If you don’t communicate well between the Yes and the close then time becomes your enemy and you run the risk of that Yes turning into a No.