It is late in the afternoon and you are stressed by the number of issues still to be addressed before you call it a day. The telephone rings, you recognize the caller ID (a CEO with one of the companies in which you have invested) and so you answer the telephone.

"There is something I need you to do," he says. "I apologize for the short notice, but I need your consent on some funding that I have negotiated. And it needs to be signed today!"

Let's look at the different perspectives of the two individuals. The CEO has been working hard to secure funding for a key project or entry into a market. He believes that he has secured the best deal. He knows what is going on in the company - he has all of the information.

A couple of years ago you invested a relatively large sum of money, believing that this entrepreneur could successfully enter a new market with a new product. You have heard nothing since the annual meeting. You are essentially void of information in this fast-moving market.

He needs your signature; you need information about what is happening, what it means and how your investment will be prioritized after new investors come on board. Your questions may be interpreted by the CEO as doubts about his work and the integrity of the deal. He may seem confrontational as he does not understand why you will not just sign the consent.

The above scenario is played out all too often between investors and entrepreneurs. We must sometimes back away from the issue at hand and remind ourselves that we are most often on the same side of the table, wanting what is best for the company. The issue is not the funding or the personalities; it is a lack of information brought on by poor communication.

Let's take a look at what is needed by both the entrepreneur and the investor.

The entrepreneur's perspective and obligation:

• Consistent communication. Make it a habit to update your investors on a monthly or quarterly basis. I suggest that CEOs develop a template that can be easily updated and e-mailed to investors with the following information: updated financial information (sales, profitability, cash flow, key balance sheet items, etc.), comparative numbers on the key financial items (current quarter vs. same quarter last year, YTD vs. previous YTD), and finally a few paragraphs of commentary on trends, strategy and future direction.
• Event-driven communication. If you anticipate raising money, acquiring a competitor, merging with another company or hiring a high-profile individual, begin communication with the key investors before you need their assistance. For example, if you have previously raised debt (convertible or otherwise), you may need your investors to subordinate their position or to convert to equity prior to a new investor buying into the company. The day before closing is not the time to ask for cooperation.
• Annual meeting. Make the event more than just a vote for the board and the accounting firm. Talk openly with your investors about both your opportunities and your challenges. I would rather attend a meeting where the CEO is open and honest about what is happening and is seeking advice and assistance in moving the company forward.
• Other. Use your Web site as a way to communicate with investors. Remind your investors to visit the site to read press releases, view customer comments and to receive updates on products.

• Read and understand the company communication. If you are unsure about something, call the CEO. No contact means that you understand the update and are not concerned about how things are progressing.
• Attend the annual meetings. The event is held for you.
• Be prompt in responding to requests. Remember the CEO is under pressure to perform. Investors can be a resource for growth or a burden to business operations. Communication is key is maintaining a good relationship.