Working with a new investor

Once an investment is completed, a different kind of work begins. The company needs to deliver its plans while keeping new owners informed and involving them in the decisions agreed during negotiations.

The legal documents matter. So do the working habits that develop around them: how information is shared, when concerns are raised and whether each side understands the other's role.

Turn the agreement into a working arrangement

Bring the relevant people together to confirm how decisions will be taken. Identify what management can decide, what belongs with the board and what requires shareholder consent under the governing documents.

Make the process usable. A consent right is difficult to manage if nobody knows who should receive the request, what information is needed or how long the response might take.

Have the arrangements checked by appropriate legal and governance advisers. Informal understandings should not contradict the signed agreements or the responsibilities of directors and officers.

Agree reporting that explains the business

Set a reporting rhythm and a manageable set of measures. Define the figures consistently so that cash, revenue and progress can be compared over time.

Include the assumptions that have changed and the decisions that may be needed. A report that arrives on schedule but conceals a material problem does little for the relationship.

Discuss how significant developments will be communicated between reporting dates. An investor should understand when a matter needs attention without being drawn into every operational choice. Respect confidentiality and the information rights that apply to different recipients.

Give investor involvement a clear purpose

An investor may bring useful experience, introductions or support with recruitment. Establish where that contribution is wanted and who will coordinate it.

Distinguish an offer of advice from a management instruction. Employees can become confused if they receive competing directions from an executive and an influential shareholder.

Where an investor has a board seat or an observer role, clarify the responsibilities, access and limits of that role with the relevant advisers. Similar attendance at meetings does not make the roles interchangeable.

Discuss setbacks before they become arguments about trust

Consider an illustrative delay in a planned launch. Management may regard it as an operational adjustment; the investor may see it as a threat to the growth plan on which the investment was based.

Bring forward the evidence, options and recommendation while there is time to respond. Explain the effect on cash, milestones and any further funding needs. Acknowledge where the original assessment was wrong or remains uncertain.

Also revisit expectations about future investment and exit. An investor's willingness to discuss another round does not establish a commitment to fund it. Keep the distinction clear in planning.

The first few meetings are a useful time to check whether the arrangement works for both sides. Adjust reporting and communication where needed, while preserving the agreed decision rights. Clear habits established early make later, more difficult conversations easier to conduct.

Further reading: the British Business Bank's Angel Investment checklist, including its discussion of reporting and expectations between founders and investors.