Tagged: cognitive bias

Raising Funds? Avoid These 7 Costly Investor Relations Mistakes

15 December, 2023

Raising funding is no easy feat, especially for first-time founders. You need a solid business plan, traction to demonstrate market fit, and the skills to pitch effectively. Yet founders often trip up when it comes to investor relations — the ongoing communication and relationship building after that first check clears.

“We’ve seen companies make mistakes managing investors that have cost them dearly down the line,” said Michael Mohammadi, CEO and co-founder of StormX, an investor relations platform. I sat down with Mohammadi and his co-founder, Eduardo Fonnegra, to get their tips on avoiding common investor relation pitfalls.

1. Don’t get caught up in short-term fundraising

It’s tempting to focus on immediate fundraising needs without considering the long-term ramifications of taking on certain investors. “A lot of founders get caught up in just meeting the first couple of investors who can give them money,” said Mohammadi. However, not all money is created equal.

The wrong investor partner can hurt you down the road, especially if their priorities end up misaligned with the direction you want to take the company. Evaluate investors thoroughly, not just based on the size of their check, but whether they can provide strategic advice and introductions that support your vision. With the right investor relationships, fundraising becomes a byproduct of building something great.

This tendency to prioritize short-term gains over long-term success is an example of the cognitive bias known as loss aversion. Founders are so anxious to avoid the pain of missing payroll or running out of cash in the near term that they make hasty decisions on investors that cost them later. Being aware of this bias can help founders take a balanced perspective.

2. Don’t neglect ongoing investor relations

“A lot of startup founders think that the only way investors will respond favorably is if they provide their best pitch on first contact,” said Mohammadi. Unfortunately, this Shark Tank-style approach often backfires. Don’t think of investor communication as a one-and-done sales job. The goal is to establish authentic relationships based on mutual understanding.

Schedule regular investor updates through calls and newsletters. Seek investor advice to strengthen your business model. And involve them in important strategic decisions as valued partners. By keeping your investors engaged and informed, you build crucial trust and support for when you eventually need to raise capital again.

Here, founders can fall prey to confirmation bias — a cognitive bias that involves seeking out information that validates their existing perspective while ignoring contradictory evidence. After landing an initial investment, founders feel confirmed that their model and pitch work. Yet neglecting ongoing investor relations undermines long-term success. Being cognizant of this bias is key.

3. Fix operational weak spots before fundraising

The strength of your operations will directly impact fundraising success. “We want to see companies have all their positioning in order before connecting them with investors,” said Mohammadi.

Yet some founders rush into pitching before getting their house in order. Have your pitch deck, financials, KPI dashboards, and other materials ready for investor scrutiny. Build up marketing and sales to demonstrate traction.

Work on any weak spots in your team roster or business processes, and show scalability. The more you button up operations on the front end, the easier fundraising becomes on the back end. Investors want to put money into startups primed for growth.

4. Don’t focus exclusively on fundraising

At the end of the day, fundraising is not the end goal. It’s a means to grow your business. “Too many founders focus on pitching, pitching, pitching. They need to spend more time on actual relationship building,” Mohammadi emphasized.

Rather than fixating on closes, think about how you can forge durable relationships with investors. Successful investor relations depend on cultivating a network that supports you during good times and bad.

Even if an investor passes, stay in touch. They may connect you with others or come back around in the future. With strong relationships, fundraising takes care of itself.

5. Pick investors who truly understand you

Not all investors are created equal. Beyond capital, you want backers who grasp your vision and can provide strategic guidance. Vet potential investors thoroughly, just as they’ll be vetting you. Look for overlaps in values, priorities, and working styles. Seek warm introductions from other founders and advisors to find the best fit.

Taking the time to choose compatible investors reduces friction down the line. With investors who share your mindset and interests, you don’t have to worry about pushing your company in directions that don’t feel right.

6. Never underestimate the power of community

Investor relations are undergoing a shift from a VC-centric model to community-driven funding. “I think crowdfunding and blockchain will revolutionize startup investing,” said Mohammadi.

Platforms like Republic and Wefunder make it easier than ever for founders to connect directly with customers, fans and smaller-dollar investors rather than relying solely on institutional capital.

Build an engaged community that wants to literally invest in your success. Share progress transparently, solicit input, and reward loyalty. A grassroots investor base will provide funding as well as invaluable feedback to hone your product-market fit.

7. Embrace investor relations as an ongoing journey

The companies with the strongest investor ties don’t view fundraising as a one-off event. They embed communication with investors as an integral, ongoing component of operations. Making investor relations a habit avoids scrambling to raise capital reactively and build rapport when your back is against the wall.

Successful investor relationships are earned over time through consistent outreach and alignment on values. Maintain these connections during funding downtimes so they’re primed to move when it counts. With disciplined nurturing of your investor network, you’ll be “fundraising ready” no matter what the markets throw at you.

Leverage these tips, synthesized from my in-depth conversation with StormX’s founders, to build investor relationships that fuel sustainable startup success. Avoiding missteps like focusing on short-term fundraising, neglecting ongoing communication, and not addressing operational weaknesses beforehand will pay dividends as your company matures.

Investor relations are challenging but immensely rewarding when done right. With commitment and savvy relationship skills, you can secure the backing to turn your vision into reality.

Contributed to EO by Dr. Gleb Tsipursky, who helps leaders use hybrid work to improve retention and productivity while cutting costs. He serves as the CEO of the boutique future-of-work consultancy Disaster Avoidance Experts. He is the best-selling author of 7 books, including the global best-sellers Never Go With Your Gut: How Pioneering Leaders Make the Best Decisions and Avoid Business Disasters and The Blindspots Between Us: How to Overcome Unconscious Cognitive Bias and Build Better Relationships. His newest book is Leading Hybrid and Remote Teams: A Manual on Benchmarking to Best Practices for Competitive Advantage. His expertise comes from over 20 years of consulting, coaching, and speaking and training for Fortune 500 companies from Aflac to Xerox, and over 15 years in academia as a behavioral scientist at UNC-Chapel Hill and Ohio State. A proud Ukrainian American, Dr. Gleb lives in Columbus, Ohio.

For more insights and inspiration from today’s leading entrepreneurs, check out EO on Inc. and more articles from the EO blog.

Categories: FINANCES general Lessons Learned OPERATIONS STARTUP

Tags: cognitive bias Disaster Avoidance Experts Dr. Gleb Tsipursky Eduardo Fonnegra entrepreneurs' organization Gleb Tsipursky Michael Mohammadi StormX

How to Make Your Corporate Wellness Program Truly Effective

25 October, 2023

Corporate wellness programs have become commonplace, with companies offering everything from gym memberships to meditation apps. Yet according to my interview with Tawn Williams, founder of corporate wellness firm House of Anaya, research shows that most such programs fail to get significant engagement and participation from employees. Surveys indicate that around 80% of employees typically do not take advantage of the wellness offerings provided by their company. This lack of impact and usage means that companies are getting very little return on their investments in workplace wellness initiatives.

So what can organizations do to make their corporate wellness efforts work? How can they design and implement programs that employees will actually participate in and benefit from? Here are three key best practices to keep in mind.

1. Start with Psychological Safety

First and foremost, companies must focus on creating an environment of psychological safety when it comes to wellness. Many employees are hesitant to take advantage of wellness offerings because they feel unsafe admitting they have any kind of mental health or other wellness challenges to deal with. They do not want to be stigmatized or perceived as “weak.”

Williams points out that managers in particular have an enormous direct impact on the mental health of their employees, even more so than family members or doctors. When managers regularly use language that normalizes and supports wellness practices, employees feel much safer taking time for activities like meditation breaks or yoga classes without fear of judgment.

In addition to psychological safety, companies also need to think about how they integrate wellness programming deeply into their organizational culture itself. Too often, wellness initiatives are introduced almost as an accessory or separate program, rather than incorporating wellness into the day-to-day culture. When this happens, employees are much more likely to see any wellness activities as extra work and tasks they must take on, rather than something truly meant to benefit them.

2. Encourage Participation

Improving any complex organizational system like a corporate wellness program takes time and concentrated effort. It is important for companies to realize they will not transform their wellness offerings overnight or see immediate sky-high participation. True culture change requires focus on reasonable milestones over multiple years. For instance, in the first year, focus on getting just 25% of employees to utilize one wellness offering per quarter. The next year, aim for 50% using two offerings per quarter, and continue ramping up until hitting 75% utilization in the third year. By setting realistic, incremental goals like these, companies can make steady and sustainable progress.

One impactful way to drive participation and focus on wellness is to incorporate it into formal performance management mechanisms. For instance, a certain percentage of a manager’s performance evaluation could be tied to how well they provide wellness opportunities for their team and model beneficial practices themselves. Bonuses for meeting wellness targets could be implemented. There are many creative ways to signal that wellness is a central priority by linking it to other performance metrics managers care about.

3. Address Cognitive Biases

One major challenge in improving corporate wellness programs is addressing common cognitive biases that get in the way. Two biases that play a particularly strong role are loss aversion bias and status quo bias.

Loss aversion bias causes employees to perceive potential losses from wellness activities as psychologically worse than the gains. For example, an employee may see meditating during a lunch break as “losing time” to work rather than gaining calmness. To combat loss aversion, companies need to frame wellness practices as reducing losses (like burned-out productivity) rather than taking away time.

Status quo bias leads both managers and employees to irrationally favor sticking with the normal routine over trying wellness practices. Even when employees say they want wellness options, status quo bias causes inertia. Companies can overcome status quo bias by making small wellness habits very simple to initiate (like one-click app sign-ups) and rewarding experimentation with wellness offerings rather than perfect participation.

Understanding cognitive biases at play allows companies to intentionally design nudges and incentives that encourage overcoming natural mental obstacles to using wellness programs.

Reframe Workplace Wellness

The path to successful and impactful corporate wellness programming requires reframing workplace wellness as a true organizational core value rather than a discardable initiative. Following practices focused on integration, safety, accessibility, and continual improvement creates the cultural shift necessary for employees to fully benefit from and embrace workplace wellness.

Investing in holistic wellness across all elements of the employee experience provides tremendous rewards for both companies and their workforce when executed with intention and commitment over the long-term.

For more insights and inspiration from today’s leading entrepreneurs, check out EO on Inc. and more articles from the EO blog.

Categories: Company Culture HEALTH PEOPLE/STAFF

Tags: cognitive bias Disaster Avoidance Experts Dr. Gleb Tsipursky entrepreneurs' organization

Why some leaders deny reality with return-to-office strategies amid Delta surge

29 September, 2021

Contributed by Dr. Gleb Tsipursky, an internationally-renowned thought leader in future-proofing and cognitive bias risk management and an EO 360° podcast guest. We asked Dr. Tsipursky to explain how normalcy bias and other cognitive biases impact entrepreneurs in determining return-to-office scenarios. Here’s what he shared:

As the efficiency rate of vaccines against the Delta variant slides to 39%, company leaders who implement a normal office return are denying reality. The threat is now indisputable: Delta variant infections and deaths have reached an alarming rate in just a few months. No wonder the US Centers for Disease Control and Prevention recommends that everyone—including those who are fully vaccinated—wear masks and has begun to recommend booster shots for at-risk groups.

Still, many companies, from large ones to start-ups, and even the US federal government, are pressing on with the return to the office, despite employee resistance. Of those who worked remotely during the peak of the pandemic, over a third have already returned. Most of the remainder are required to do so by mid-autumn. In addition, as schools resume in-person learning, Delta variant cases and hospitalizations are increasing at alarming levels.

Employees’ stance on work arrangements

Results of in-depth surveys on employee preferences around return-to-office plans clearly showed a reluctance for a normal office return even before the Delta surge. Approximately half say they will quit if their preferred work arrangements are not approved. A quarter to a third of employees favored full-time remote work, while more than half preferred a hybrid schedule of a day or two in the office.

Numerous employees have already quit in response to the compulsive plans of their employers to get them back to the office. The Delta surge will lead to more resignations among employees who don’t wish to risk their health with breakthrough infections.

Categories: Best Practices Crisis HEALTH STRATEGY

Tags: behavioral science cognitive bias delta plus variant Delta variant Disaster Avoidance Experts Gleb Tsipursky Great Resignation mu variant return-to-work transition