Knowing How to Write Effective Investor Updates Is More Important Than Founders Think

On top of all the responsibilities that come with running a startup, as a founder, putting together an investor update can feel like a chore. Though it may be a task you want to keep putting off on your to-do list, keeping your investors engaged and in-the-loop is very important. Here’s a breakdown of how to write an effective investor update and what you should include.

Why Do I Need to Update My Investors?

If the idea of putting together an investor update feels like a burden, we invite you to put yourself in your investor’s shoes. They’ve taken a calculated risk by investing in your company; you kind of owe it to them to keep them looped in.

Failing to provide investor updates is simply poor form; however, you may also be legally obligated to provide updates. The frequency at which they must occur, and the information required, depends on the type of offering used to raise investments.

At MicroVentures, we generally ask the companies we have made primary investments in to provide us with quarterly updates that we may pass on to our investors. Under SEC regulations, companies who raise via Regulation Crowdfunding are obligated to provide an annual report for investors on their website that must be filed within 120 days of the fiscal year covered by the report.

There are a few circumstances after which a company may no longer be required to provide an annual report, and Reg CF issuers should review their obligations on an annual basis. (Learn more about the specifics involved in reporting on Regulation Crowdfunding offerings.)

Finally, 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.

Regular updates help to build trust and keep investors engaged in what you’re doing.

What Do I Need to Include?

There’s no one-size-fits-all solution, but there are definitely a few key sections you want to be sure to always cover in your investor updates. Once you’ve established your typical investor update, you can use it as a template moving forward.

Executive Summary

Your executive summary should lead your update. The formatting is up to you, but it should briefly address major changes since your last update, such as milestone progress, big wins, setbacks, key hires, etc. If an investor skims the update, the most important things they should know need to be highlighted here.

Launches

New product or service launches are a big deal and should be highlighted early in your investor update. While many may already be aware, never assume that they already know about it. 

Financials & KPI’s

The financials and KPI’s that are important to include in your update will depend on your industry and business model. A few basics to include would be:

• Revenue
• Cash & burn rate
• Margins
• Sales numbers
• Customer traction

Whatever you choose to include, it’s important to include the same metrics across all updates, even if they’re not always positive.

Goal progress

Typically, a pitch deck will include specific milestones along your product roadmap. Investors will often want to see metrics on where you’re at on reaching these goals. If you’re dealing with challenges in meeting your goals, this is a great time to be transparent about those as well as your wins.

Key hires

As your team grows and changes, be sure to include any new key hires in your update, including their expertise and how they are anticipated to help the company reach set goals. Board member appointments are also fitting to include here.

Asks

Your investors want you to succeed. If there is something you need that you think your investors may be able to help with, don’t be afraid to ask. Whether it be finding talent, scoring an introduction, or addressing a challenge, let them know.

Practical Tips

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. There’s no need to bare 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 an investor 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.

…But to the Point

This isn’t the time to offer a page long letter from the founder. Keep it complete but to the point, and avoid adding unnecessary fluff.

Final Thoughts

Investor updates don’t only benefit investors—they benefit you too. Tracking goals and metrics can help give you a better macro-level view of your efforts, and over time will just become a good habit. Similarly, they help to build better relationships with your investors over time, which can only help your business in the long-run.

Is your startup ready to raise capital? Apply today to raise capital with MicroVentures!

Want to learn more about growing your startup? Check out the following MicroVentures blogs to learn more:

• Finding and Targeting Your Market
• Protecting Your Intellectual Property as a Startup
• Learning by Listening: Investing and Startup Podcasts to Check Out
• How to Talk About Your Crowdfunding Raise

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The information presented here is for general informational purposes only and is not intended to be, nor should it be construed or used as, comprehensive offering documentation for any security, investment, tax or legal advice, a recommendation, or an offer to sell, or a solicitation of an offer to buy, an interest, directly or indirectly, in any company. Investing in both early-stage and later-stage companies carries a high degree of risk. A loss of an investor’s entire investment is possible, and no profit may be realized. Investors should be aware that these types of investments are illiquid and should anticipate holding until an exit occurs.