Follow-up and investor relations
How do I communicate with investors when a deal underperforms?
Short answer
Tell investors early, plainly and in the way they prefer to be reached. Share what happened, what the numbers show, what you are doing about it and when the next update comes. Keep it in writing so there is a record. Do not wait for them to ask. Many sponsors talk to a securities attorney about their investor updates before sending them.
Start with how your investors want to hear from you
My videos do not give a script for a bad quarter, so I will stay with what I know. Bad news is still communication, and the basics do not change. Use the channel your investor prefers, and do it early.
When I screen deals as an investor, I care a lot about how a sponsor communicates. I tell people I am traveling nonstop and that I can learn more over email. If they respect that, good. If they push for a call anyway, I read it as a sign of how they will treat me later.
In this clip I explain why a sponsor who ignores my preferred way of communicating is a warning sign before any money moves.
Summary and key takeaways from this video
"But it's a warning sign up front when people won't communicate in the mode that you want to communicate with and that works best with you as an investor."
Turn that around. When your own deal underperforms, your investors are watching the same thing. They are judging whether you reach them in a way that works for them, and whether you do it without being chased.
What a plain update should cover
I keep these updates short and factual. A good one answers the questions the investor is already asking in their head.
- What happened, in plain words.
- What the numbers show today, compared with what you told them before.
- What you are doing about it.
- What you do not know yet.
- When they will hear from you next.
Put it in writing. Email gives both sides a record and lets the investor reread it. If someone wants a call after that, offer one. Do not hide behind the email, and do not push every investor to a meeting.
Be careful with projections and with any wording that sounds like a promise. Many sponsors talk to a securities attorney about how to word updates like this. This is not legal advice.
Build the rhythm before the bad news arrives
Updates are often received better when they come on a schedule investors already know. Family offices show this well. On a panel I ran, Ulie said his family started biannual governance retreats about 25 years ago. They last several days and have an agenda built by the family and by him.
This panel shows how two families keep a regular communication rhythm going across generations.
Summary and key takeaways from this video
Another panelist described family meetings twice a year, one in spring and one in fall, which they began about 10 years ago. Ulie also said money keeps people coming back, especially when performance is good, and that when it is not, there may be issues. I take that as the real lesson. The relationship has to be built on more than good returns, because returns will dip at some point.
So set the rhythm early. Send regular updates when things go well. Then a hard update is just the next one in a pattern, and not the first time an investor has heard from you in months.
Do not wait to be asked
If you know a deal is behind, say so before the investor finds out another way. Silence can lead people to assume the worst. A clear note with a plan and a date for the next update gives them something to work with. It also shows the kind of person you are, which is what I would want to see if I were the one writing the check.
From my books and event talks
One more point on how I read sponsors. If a sponsor will not communicate in the mode that works best for me as an investor, I treat that as a warning sign up front, and I would just say no. That same test applies to you when a deal slips. Your investors are checking whether you still reach them the way they asked to be reached, even when the news is bad. Ask each investor early how they want to hear from you, write it down, and use that channel every time.
"But it's a warning sign up front when people won't communicate in the mode that you want to communicate with and that works best with you as an investor, so I would just say no to people that won't communicate with you that way."
On the record
- I say screening deals by email can clear out 95% of what comes to you, and that a sponsor who will not communicate your preferred way is a warning sign.
- Ulie said his family started biannual governance retreats about 25 years ago, and they last several days.
- One panelist said their family began regular meetings 10 years ago, with one in spring and one in fall.
Sources
From Richard C. Wilson's Centimillionaire Strategies YouTube channel: Private Investor Due Diligence Mini-Series: Episode 2 - Investment Due Diligence Time Savers, Next Generation Leadership: Effective Communication and Family Office Strategies. Quotes come from the video captions, lightly edited for readability. Figures are the speakers' own estimates and experience.
General education only. Not legal, tax or investment advice.
Talk to a securities attorney to explore options around investor communication wording, projections and forward-looking statements and offering documents. Do not use AI to write your own legal agreements.
Where to start
- Ask each investor how they prefer to be updated, and write it down.
- Set a regular update schedule now, before you have bad news.
- Use a fixed outline: what happened, the numbers, your plan, what you do not know, next update date.
- Consider talking to a securities attorney about any update that includes projections.
- Send the news early and follow up when you said you would.
More questions on this
Should I give bad news by email or on a call?
Follow the investor's preference. I like email first because it leaves a record, and I would offer a call after that to anyone who wants one.
How often should I update investors?
Pick a schedule and keep it. The families I have heard from meet twice a year, but a deal that is struggling may deserve more frequent notes.
Do I need a lawyer to review the update?
Many sponsors talk to a securities attorney about their updates, especially ones with projections or forward-looking statements. I am not giving legal advice.
Related questions
- Do I need an investor portal for my fund?No, many managers do not use a portal when they first start raising a fund.
- How do capital calls work for LPs?A capital call is a request from the GP asking LPs to send in part of the money they already committed.
- How do I turn existing investors into repeat investors?You turn investors into repeat investors by earning trust on the first deal and keeping everything simple and clear.
- How often should I send investor updates?There is no single rule, but a short update every quarter is a common baseline for private investments, with a quick note in between when something material happens.
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