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Do you have investors?
Well you probably have more headaches than you bargained for. Having Investors in your project, company or partnership means that you have lots of people to please, and keep track of! If you have raised money for your company, partnership or project, you have made great strides towards your commercial goal, whether that is buying real estate, selling products, or investing in that new start-up company that is going to be the hottest thing since APPLE! Raising money is fun and most Investors are enthusiastically giving their funds so that they can be on the ground floor of an exciting project or company.
However, once you get down to brass tacks sometimes it becomes clear that you might have bitten off more than you can chew. Especially when the project starts to get bogged down in red tape, there are more expenses than you anticipated and more cash seems to be hemorrhaging out of the company than you predicted. It is very hard to become profitable in one year, or even two years with start-ups.
The Practical Realities of a Start-up
Investors often lose enthusiasm when you reapproach them for additional funds to grow the business or when you hit some unexpected expenses and run out of cash. Often payroll and overhead is more than you anticipated, or you are having trouble getting the kinks worked out before becoming profitable. Every start-up has a learning curve to ramp up to profitability.
However, it is that start-up phase which may turn your enthusiastic Investors grumpy. And when you need more money, or you cannot send out profit distributions because you need to keep it to grow the business, then the complaining starts. Sometimes, even though you give them all of the information as to what is happening, these grumpy Investors start to get aggressive and demanding. Some of them even might complain to the Texas Securities Board, or the Texas Attorney General alleging that they were defrauded or wronged and they want their money back. You could even get a “demand” letter from a lawyer representing these Investors.
Communication with Your Investors is the key But You need our help
So what to do when you have angry or unsatisfied investors? This is a very bad situation to be in and we want you to call us BEFORE you do anything to respond. More often than not, you have not been forthcoming with your investors about the struggles to start and keep the business growing and paying bills on time. Add to that lack of communication the fact that you are very busy trying to make the company profitable and are exhausted and don’t have a lot of “spare” time to write newsletters to your investors. However, is if often a lack of communication with what is happening on a day-to-day basis with your investors that causes this rift with them.
An angry group of Investors is perhaps the worst thing that can happen to you and your new company or partnership. In fact, few people realize that it is actually a felony for money to be raised without strict compliance with federal and state securities laws. These laws are complex and are indeed, a trap for the unwary. In fact, we encourage everyone to seek competent legal advice BEFORE communicating with your angry investors because this is a place in time that you can regroup, bring them up to speed and get them back on your side and enthusiastic again.
We want our clients to be successful but dealing with unhappy investors in the wrong way can derail you for years and in ways you never expected.
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