After making an investment in a startup, an investor might be wondering “now what?” How can they track how a company they’ve invested in is doing after the investment? Some startups may send out investment updates on a regular basis to keep investors informed about company happenings, achievements, milestones, and challenges. In this blog, learn more about what investors should look for in startup investment updates, what questions they may want to ask, and how to keep up with portfolio companies that might not be sending out regular investment updates.

What to Look for in Investment Updates

The flow of information looks a lot different when making an investment in a private company vs a public company. Publicly-traded companies are required to do SEC filings, and expected to do earnings calls and analyst coverage. Private startups have different regulatory requirements and expectations. This means that investors may only gain information into company happenings through limited press releases from the company, limited press coverage from the news, or even just limited to investment updates that the founder decides to send out.

When a startup does send out an update, what information should investors seek to understand from updates?

Confirmation of Life

In a world where 9 out of 10 startups fail, at baseline, an investment update should provide confirmation of life for the startup. Many times when startups go out of business, especially in the case of early-stage companies, that information isn’t shared with investors. Sometimes, it may get picked up by a news outlet and shared that way, but not always. Continuing operations is one of the foundational pieces of information that can allow everything else in the update to matter.

Current Position and Future Plans

Generally, the last time an investor heard updates about the startup, it was either through their funding deck or at the last investment update. Therefore, investors should be looking at the company’s current position in relation to the last update. Holistically, how is the startup doing since the last point of communication? Beyond current position, what future plans does the startup have and how does it plan to accomplish these goals?

Traction

Another thing that investors may want to look for in investment updates is updated traction metrics. Has the startup obtained new customers or signed new contracts? Has it reached specific financial milestones? Have operations grown? Have new key hires been made? Was a new feature launched? Was a new partnership formed? Taking a look at a startup’s new traction metrics can be a good way to understand what they’ve been up to since an investor last heard from them.

Pivots

Additionally, an investor may want to understand if the company has made a pivot since the last update. Did a new competitor enter the market and the startup changed to focus on one area more specifically? Was product-market fit a challenge and the company adapted to better find customers? Did the business model or revenue model change to better align with customer needs? Understanding whether a company made a pivot, and if that pivot was successful, can also be important for investors to understand.

The Asks

Some startups may also add asks to their investment updates. These asks could range, spanning topics such as:

• We’re raising new funding soon, would you like to explore a follow on investment?
• Do you know anyone else who may be interested in investing in our next round?
• We’re looking for a manufacturing partner, do you know anyone you could connect us with?
• We’ve outgrown our office and are looking for a new space, do you have any office space connections?
• We’re looking to hire a sales lead this quarter, know of a sales rockstar that might be a good fit?

A startup that asks for connections and opinions from their investor base is typically well engaged and valuing those opinions can demonstrate respect.

Questions to Ask

It’s important to understand that not all investors be able to ask questions to founders, even if they do receive investment updates. And founders may be heads-down focused on operations and unable to answer questions in a timely manner. Even in the case of some investment structures, like Special Purpose Vehicles (SPVs), investors typically do not have a direct line of communication to a founder in the first place. But if investors have the ability to ask questions, the following are some questions an investor may want to ask:

• What has surprised you most about customer behavior in the last quarter?
• What is the biggest risk you are currently trying to mitigate?
• Based on what you know now, would you change anything about how you used your last round of funding?
• What metric are you most focused on improving right now, and why?

What if a Startup Doesn’t Provide Updates?

As mentioned previously, private companies are not required to provide regular updates, so how can investors still keep up with portfolio company news? To start, regularly checking the startup’s website and social media platforms may provide some information. Does the startup also have a newsletter an investor could subscribe to? Financial news platforms such as TechCrunch, PitchBook, and Crunchbase may also have limited updates about a startup on them as well, helping fill in the gaps if the startup doesn’t provide specific investment updates.

Final Thoughts

Private market investments come with a different information cycle than public ones. Updates from portfolio companies, if provided, can serve as an important tool for staying informed. These updates can provide confirmation that the business is still operating, insight into how it is evolving, and data points to measure progress against. Not every update will be comprehensive, and not every company will communicate on a regular schedule. But when updates do come, knowing what to look for can help investors make their own assessments about how the business is tracking relative to their expectations.

Are you ready invest in startups? Sign up for a MicroVentures account to start investing!

Want to learn more about investing in startups? Check out the following MicroVentures blogs to learn more:

• Early-Stage and Late-Stage Companies
• Assessing Customer Retention Metrics
• The Growth of Supply Chain and Logistics Tech
• Understanding Startup Revenue Models

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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.