Any entrepreneur would agree that social media has changed the way business is done. It has broken down barriers between businesses and their customers, and provided organizations a new forum for presenting their brand. Social media has allowed businesses to develop their voice, and build and cultivate a strong relationship with their market (vs. simply trying to sell to them).

Often overlooked is the fact that it has also changed the way potential investors go about the due diligence process, network and make their investment decisions. By understanding how investors use social media, you will help improve your chances of securing funding.

If you are in need of capital pay attention….. As you read through the points below, ask yourself – is your current social media situation going to help or hinder?

1) Evaluate the 3C’s: culture, compatibility and credibility; all three of these are important variables an investor considers, when deciding whether or not to fund a company. Social media allows an intimate view of the status and viability of the company, their brand and the way they interact with consumers.

2) Relationship Building: The investor is able to engage in casual conversations with the company (and its leaders) to start developing a relationship and evaluate personal chemistry. Looking at a founder’s (or team members) tweets can give a strong sense of who they really are and how they conduct themselves. An investor can gather a sense of their personality as well as their skills (which should serve to further support the 3C’s). Facebook, Twitter and LinkedIn allow investors to look up the entrepreneur’s profiles, figure out if they already know them in some capacity, or if they have a common connection that can give them the real scoop about who they are and what they do.

3) Deal Flow: Deal flow refers to a pipeline of opportunities. Because of the ease of entry and low cost, social media is often the first place new startups go to further their business development goals. This gives investors a platform from which to observe emerging businesses, evaluate their potential and monitor their growth (often before the company has emerged on the general radar).

The good news is……… investors are watching.

The bad news is……… investors are watching.

So, make sure you’re transparent and provide them the information they need in order to see what a great investment your company is!

Laura Petrolino is Founder of Flying Pig Consulting a full service communications, business consulting and brand development firm specializing in helping small businesses, start ups and non-profits reach their goals and expand their market outreach. She is also co-host of the small business talk show, Call A Biz Hero. You can find her on twitter @lkpetrolino