Are there any issues with having an interstate investor?

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I’ve had some interest in my business from an investor on the Gold Coast (I’m in Melbourne). First impressions seem great, but is it an issue that they are so far away?

Isn’t it better to have an investor/mentor that I can have regular face-to-face contact with, rather than the odd phone call?

Until the widespread use of innovations such as Skype, Dropbox and Google Docs, it was difficult or expensive to communicate and collaborate with business partners if you were not in the same office or city.

While the “human touch” is always better, it is certainly possible and more common to have investors, staff and customers in different locations.

Your question raises the issue of how much involvement your investor needs and expects with you and your business, as well as how much (or little) time you require with your investor?

In previous articles I have advised that it is wise and essential to agree the ground rules for engagement between investors and founders at the very beginning.

My general advice is that you must schedule formal meetings or call times, and avoid ad-hoc calls or drop-ins.

For an early stage company with an investor who is able to add value, I would advise a weekly five to 10 minute call to touch base, a monthly report with key financial and operational reports, and a quarterly meeting in person of an hour or two.

If your investor is in another city or country, all of these touch points can be undertaken via Skype, by sharing key documents in a cloud-based service and with occasional meetings.

I am based in Sydney and have invested in a company in Las Vegas (Walls360) but have never met the founders other than by Skype.

I am chairman of a company based in Adelaide (e-channel online) and I have recently invested in Singapore (Sprooki).

In these cases, distance or location is rarely an issue. A short well-written report or a quick Skype call cures most problems.

If you are in Melbourne and your investor is in Queensland, I would suggest that you embrace the weather advantages of one and the food benefits of the other, and meet every quarter in either location.

 

This article was first published in StartUpSmart.

© 2013 – 2014, Philip Alexander. All rights reserved.

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