Regular investor updates are one of the highest leverage activities entrepreneurs can do to make their company successful. They provide tangible value to companies and a positive signal to investors. And they don’t have to be hard.
If you follow me on twitter, you will have noticed that investor updates have been a topic on my mind a lot recently. There is some debate in the industry about how vital they are and what form they should take. Hopefully this post can codify my thoughts and be a resource to any entrepreneurs.
Help me, Help you
Should investor updates even be done? The answer is an overwhelming YES. Not to be confused with an emphatic YES or a confident YES. An overwhelming YES. Updating your investors is important for a few reasons.
First, investors cannot help you if they don’t know what you need. Investor updates are an opportunity to ask for help/guidance/connections. It may seem intimidating to open your company’s komono to some of the less than glamorous aspects of the business, but by the time investors find out about issues on their own, it will often be too late for them to help. This of course all operates under the assumption that your investors are able and willing to help you. If they are, great! Update them. If they aren’t, why are they your investors in the first place (a topic for another post perhaps)?
I am going to let you in on a little secret. Investors want to be helpful! There are better ways to make money in finance than being a VC. For the most part, VCs have an itch to help build the next great thing and providing help to portfolio companies allows them to scratch this itch. I know that is the case for me. Anyday I can make a fruitful introduction or help clean up a model for a portfolio company is a good day in my book. I think any other good investor would agree.
Brent Beshore describes entrepreneurship as a “daily knife fight”. It is not easy. Founders are faced with new issues and obstacles every day. Mobilizing your investors can help solve a lot of those problems. Why turn down a resource that is not only willing, but excited to help you succeed?
Timing is Everything
As with many things in life, the key to investor updates is consistency. Developing a regular cadence with your updates will take a lot of the punch out of anything that is less than perfect. An email received after not hearing from a founder for 6 months saying that a company missed one of their revenue milestones and need help hiring a VP of engineering seems like a catastrophe. An explanation of why a milestone target was missed and a request for help hiring a VP of engineering received as part of a regular investor update is a Tuesday.
There is some debate in the industry on how often companies should be updating their investors. Some investors believe quarterly updates are sufficient. This may work for later stage companies, but for early stage companies, I believe that monthly investor updates are always the way to go. Monthly updates allow you to keep your updates brief and to the point. In-depth strategic discussions can be left for quarterly board meetings.
How Much is too Much
Entrepreneurs have enough on their hands, so investor updates absolutely must be designed to keep the burden to a minimum. With a monthly cadence, your update can be brief. I suggest that entrepreneurs don’t spend more than 15-30 minutes putting together their update. Items noted should be whatever is top of mind. You don’t need to write a novel, just give your investors a sense of the momentum of the company and make any asks you need help with. Here is a template:
Hello Investors,
XYZ month was a productive one for ABCify! This month we accomplished A, B, and C. We are excited about Initiative X and are thrilled about new hire Y. We continue to execute on plan Z.
Thank you for your continued support,
Founder
Company
Wins:
Win 1
Win 2
Win 3
Challenges:
Challenge 1, brief explanation
Challenge 2, brief explanation
Challenge 3, brief explanation
KPIs:
Metric 1
Metric 2
Asks:
Ask 1
Ask 2
That’s it. Seriously. If you fill in the blank with the above template your investors will LOVE you. This is a good thing. Happy investors make for happy fundraises. More than that, consistent updates are a very positive signal for investors. It shows that the entrepreneur is on top of things and is being thoughtful about their company.
And it shows that the founder is smart.
Because spending 15 minutes keeping your investors happy and leveraging their expertise to help you overcome obstacles is one of the most high-leverage activities you can do as an entrepreneur.