One of your many jobs as an early-stage startup is to keep your investors up-to-date. It’s not quite as much fun as building a prototype, but sending regular investor updates will go a long way toward keeping your investors happy – and out of your voicemail box. It’s also an important best practice for companies of all sizes, and it’s something you’ll need to do from here on out.
In our experience, the best investor updates have three things in common:
They’re consistent: The best updates are sent on a consistent schedule and are consistent about the information they include. Whether you choose to send updates weekly, monthly, or quarterly, you want to send them out before the phone starts ringing and investors start asking questions. If you have to keep it short in order to keep to a schedule, that’s fine. Short updates sent on a regular basis are preferable to long updates sent sporadically. To make it easy on yourself, use a template so you’re not reinventing the wheel each time. A template will also help ensure that your content is consistent from one update to the next. Update My VC, created by RRE Ventures, provides a great outline entrepreneurs can use to communicate with their investors.
They’re transparent: As tempting as it may be, don’t cherry-pick the data you share. I’m not saying you should bare your company secrets, but if you routinely share a particular KPI or business development commentary in each update, don’t leave it out just because it didn’t meet expectations. The omission may raise questions, which is the opposite of what the update is supposed to accomplish. Transparency breeds trust, so be upfront about the ups and downs of the business. Share the challenges you’re facing, and if you need something – an introduction to an advisor or potential customer, for example – don’t be afraid to ask for it. No one wants to see you succeed more than your investors.
They’re complete. It’s highly unlikely that your investors have been following your day-to-day activities. Your company may be your life, but your investors have other things on their plate, so don’t assume that they saw your Facebook post last week, or that they’re following your CTO on Twitter. Take this opportunity to tell them what’s on your mind and how things are going. Describe key meetings, new partnerships, the latest product developments – things that will get investors excited and engaged. And then tell them what you have planned for the near term. If your plans reflect a shift in priorities, tell them that, too.
Keeping your investors up-to-date has benefits for you as well, especially when it comes time for follow-on investment. Going dark for months and then popping up only to ask for more money generally doesn’t go over well. It’s easier to go back to the well if you’ve been actively communicating with your investors all along.
Investor updates may seem like a chore until they become a habit. But eventually you’ll find that the process forces you stay on top of key metrics, helps you stay accountable to yourself and your investors, and gives you an opportunity to leverage your relationships. You may get as much out of writing the updates as your investors do out of reading them!
