Investor Relations

Ensuring Investor Trust: Building Credibility from Day One 

"In the bold competitive world of startups, ensuring investor trust is paramount. Building credibility from day one establishes a solid foundation. Transparent communication, ethical conduct, and a focus on delivering on promises are key elements in attracting and maintaining the confidence of potential investors, setting a course for long-term success."

By teammarquee . October 30, 2023

investor relations

Are you a startup founder looking to raise funds? In today’s competitive business world, it has become increasingly difficult to attract and retain the right investors. But if you have been lucky enough to find an investor, how do you earn investor trust?

Investor Trust Building is an essential step because investors are more likely to invest in startups that they trust. Trust building is also important because it allows investors to be more supportive as your startup grows. In this blog, we will talk about some tips to help startups in building trust with investors:

Steps to Building Credibility from the Start

Here are some steps to help startups build credibility and garner investor trust from the start:

1. Understanding Investor Expectations: 

We already know that investors do love businesses that show a higher growth potential and have a laid-out plan for success. However, every investor may have different expectations when it comes to their investment goals, risk tolerances, and time horizons.

Here are some ways to understand investor expectations:

  • Talk to them: Try having a face-to-face interaction with your investor to get first-hand information about their investment patterns. This can be done at investor conferences, pitch events, or one-on-one meetings. 
  • Read Investment theses. Many investors publish investment theses, which outline their investment philosophy and criteria. Reading them can help founders understand what investors seek in their investments.

Analyze their past investment: When choosing a VC or an angel for your business, founders must analyze the investment portfolios. This will help them understand the startups they are investing in and their preferred investment stage.

2. Transparent Communication

Being transparent in communications will help startups with investor relations credibility. Having open and transparent communication channels will help establish credibility in fundraising. Here are some other benefits of having transparent communication:

  • It helps investors better assess the risks and make informed investment decisions.
  • Transparency can help startups attract new investors. 
  • Transparency can help startups with investor retention, thus saving founders from the hassle of pitching to new investors repeatedly.

3. Delivering on Promises

One of the most effective investor confidence strategies is to deliver on your promises. This will allow investors to know that they can rely on the team to execute their business plans. When startups deliver on their promises, they show investors they are competent, reliable, and committed to success.

Here is how delivering on promises can help startups build investor trust:

  • Putting your plans into action will show your investors that your team is competent and reliable. 
  • Every successful project execution helps in building trustworthy fundraising practices by instilling confidence in investors.
  • By delivering promises, startups can prove their competitiveness and their ability to take risks.

4. Establishing credibility 

Startups must demonstrate competence by hiring a strong team, developing a well-thought-out business plan, and achieving key milestones. Investors want to invest in teams with a proven track record of competence. Competent teams can help startups in establishing credibility in finance. 

Here are some credibility-building strategies for startups:

  • Have a strong business plan: Have a well-written and clearly articulated business plan that states your startup’s vision, mission, and strategy. Also, include your detailed financial projections to build trust in financial relationships.

Build a strong team: Startups should hire experienced professionals with the right skill set and knowledge to execute their business plan.

  • Achieve key milestones: Startups should set and achieve key milestones, such as launching a product or service, reaching a certain number of users, or generating a certain amount of revenue.

Act professionally and ethically. Treating your employees, customers, and investors with respect is one of the best practices for investor credibility. They should also conduct their business in a fair and ethical manner.

5. Providing Accurate Financial Information

Startups must maintain up-to-date financial records and allow investors to access this data. This not only helps in cultivating investor confidence but also helps investors understand the risk involved and make informed investment decisions. 

Given below are some additional tips on preparing and providing accurate financial information to investors:

  • Use standardized accounting principles. This will help investors compare your statements with those of other companies and make informed investment decisions.
  • Be consistent in your accounting practices. Don’t change your accounting practices from time to time. This can make it difficult for investors to track your financial performance over time.
  • Provide footnotes and disclosures. Footnotes and disclosures will provide additional information to the investors about your financial statements.

Make your financial statements accessible. Investors should be able to access your financial statements and other financial information easily. To build investor trustworthiness, startups must post their financial statements on their website or provide them to investors upon request.

6. Showcasing Success Stories: 

Highlighting your past success and discussing your successful projects and satisfied clients is one of the best investor confidence-building tips. This helps provide them with tangible evidence of your business’s strength.

Below are some ways startups can showcase their past successes:

  • An investor pitch deck is a startup’s most important marketing tool, and it can be used to highlight the company’s achievements. Startups can use metrics such as user growth, revenue growth, or customer satisfaction.
  • Sharing testimonials from happy customers and partners can help in starting with investor confidence. Investors will more likely trust your company if there is a proven track record of success.
  • Winning awards and accolades from industry organizations and mentioning them to your investors can be a great way to demonstrate a startup’s success and credibility.
  • Positive media coverage can also help startups raise awareness of their business and establish a proven credibility in finance.

7. Being Accessible and Responsive:

Timely accessibility and responsiveness of founders are vital in developing investor communication trust. Provide timely responses to investor inquiries, provide clear points of contact, and be available for meetings or discussions with the investors. Show that you value the investor’s time and input. Address any investor concerns promptly and maintain transparency in fundraising to win the trust of your investors.

Summing Up:

Remember that building trust is a gradual process, and it will depend on various factors like understanding and meeting investor expectations, keeping transparency in communication and building personal relationships with investors. It may take several months or even a few years for startups to build investor trust. However, being in the public eye and garnering positive media coverage can greatly help. Remember to follow reliable fundraising practices and be consistent with your performance.

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Maintaining trust involves transparent communication, regular updates, and delivering on promises. It's essential to keep investors informed about progress, challenges, and changes in the business. Building a strong track record of execution and being open about any issues can also help maintain trust.

Building credibility from the start is crucial because it sets the tone for the investor-founder relationship. Investors want to know that they can trust the entrepreneurs they're backing, and a strong foundation of credibility can instill confidence in the viability of the business and the leadership team.

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