Full Disclosure: Reporting Transparency
“I want full disclosure whether the new[s] is good or bad.” – Carl Ingram
The Securities Exchange Commission (SEC) explains that “federal securities laws require publicly traded companies to disclose the information on an ongoing basis” including quarterly reporting through Form 10-Q and yearly through Form 10-K. A Board of Directors, including a CEO, company executives, large shareholders, and external personnel, can be a useful tool to corporations, ensuring their reporting is both accurate and transparent.
One of the major components of start-up companies is follow-on funding, while follow-on funding can mean both good and bad things in terms of success, transparent reporting is a necessity to ensure investors are investing in companies reaching milestones and projections. If a company is non-transparent there are many risks to investors including dilutive funds, investing in the unknown and potentially hopeless deals, loss of capital and trust with the company. The easiest solution for entrepreneurs and company executives is to be upfront, and honest with investors; transparency results in honest reporting.
Deal leads can be a great part of Angel Investor involvement into entrepreneurial ventures in which they are the point of contact and given their interest as an investor and as part of the venture, they are most likely to be honest to both parties. After the first round of investment is complete; however, deal leads tend to become overinvolved and evolve to be great brand ambassadors that fail as follow-on deal leads. These deal leads then typically inquire about follow-on funding from current investors out of personal interest and passion for the company, rather than a wise investment decision.
Overall, financial reporting using transparency is great way to remain honest with investors and to ensure trust; by utilizing this method, entrepreneurs are more likely to gain investment and to succeed.