One of the problems with a lot of small investors is that a lot of your time can be eaten up answering their questions about how the business is going. They have money invested and will want to be informed about how their investment is going.
If it was me, I would try to do a few things upfront:
- Make sure they understand the nature of an investment in a startup: ie. risk involved, (in)security of capital, liability, debt vs equity, the nature of uncertainty in a startup.
- Make sure they are very clear about the terms of the investment and what they mean, especially time expected for return of capital, time to pay interest/distributions, what happens if the company goes belly up, if and when they can liquidate their investment
- Set expectations on how and how often you will communicate with investors. Make sure they know you want to spend your time working on the business
- Limit the seats on the board (if appropriate) to 1 private investor (who may be nominated by the others.
Then update them regularly at the timeframes you have nominated. At these times be transparent with information but understand that they may not have the financial/business understanding you do.
Hope this helps