Sitting down to write investor updates often gets lost in the action and excitement of running a business. Penning a long report to justify what you’re doing with investor money can also be a little stressful. As a result, many founders procrastinate or don’t even bother to send an investor update on a regular basis.
This is a mistake.
While investor updates aren’t usually mandated as part of your contract, they are one of your most powerful tools for building a strong relationship with a group of people who can help you grow your business. When you neglect to keep your investors in the loop, you’re not only eroding their trust and interest in your company, but you’re also failing to utilize some of your most valuable resources: the expertise and connections of your contributors.
Compiling a report for investors doesn’t have to be a time- and resource-consuming exercise. By taking just an hour or less out of your month to fire off a quick investor update, you can help your startup grow by forcing self-reflection and soliciting help from people who are invested in growing your business. Create yours in minutes with our done-for-you investor reporting template you can download today.
Here are seven ways to create painless and efficient investor updates that help build positive long-term relationships with your investors.
Shift your mindset
Investors are as excited to read a long, technical report on your company’s progress as you are to write one. But they aren’t interested in the nitty-gritty details of how you’re choosing to run your business. They want to know how your company is doing and how they can help you succeed. Your investor update isn’t as much about proving your prowess as a leader as it is about relationship-building.
Investor updates also keep you fresh in investors’ minds as a competent and involved founder, which can lead to more investments down the road. Semil Shah, creator of Haystack, an early-stage investment firm, says that investor updates are “an opportunity for the founders to supply their most passionate early supporters with information and ammunition to infuse into our conversations with downstream investors, potential candidates, and potential angels and [business development] prospects.”
It’s important to update investors on a regular basis, whether the news is good or bad. Reaching out only when you have something positive to say can ring hollow and lead investors to doubt your word. Conversely, only reaching out when you have bad news or need a favor can spark doubt and panic from investors. Neither of these is a good foundation for a relationship.
Consider this account of a startup, Amicus, that lost half a million dollars through a series of missteps, including failure to keep investors updated:
“One thing that I let slide was investor updates. There were a couple investors I talked to regularly, but by and large my communiqués were scarce, and normally were sent when I needed something. This meant that when the crisis struck, it took much longer for investors to be able to help than it needed to…and as you can imagine, having the first substantive update you hear in a while be about an impending crisis is not the most inspiring thing.”
Instead of reaching out to your investors on an ad hoc basis, develop a habit of sending regular updates that contain both the successes and failures of your company. Couching bad news alongside consistent growth updates makes it easier to swallow.
Some founders do quarterly investor updates, but reaching out monthly will build relationships faster and help establish the routine nature of the communiques. Leo Polivets, partner at Susa Ventures, says that 80 percent of startups he works with send monthly updates (and 5 percent even send weekly ones!).
Brief is better
Now that you are committing to reaching out on a consistent basis, there is no need for long catch-ups. Keep your updates brief. Not only will they be easier to write, but your investors are more likely to read them.
Pedro Sorrentino, an experienced VC, says that his previous firm, FundersClub, has a portfolio of hundreds of investments, so they see two or three separate investor updates every day. He appreciates it when founders get straight to the point: “You should start with a short, 2-3-sentence executive summary, followed immediately by the most significant asks and requests. A common mistake I see happening is when founders leave the key asks to the bottom of the email.”
There’s no need to spend a lot of time crafting your updates. Establishing a formula similar to the one Sorrentino suggested will make updates quick and easy to pull together.
Eric Berg, an investment analyst at Rev1 Ventures, suggests spending no more than 15-30 minutes writing your updates each month. Download our free investor reporting template today to keep the process quick and simple.
Don’t twist yourself into knots trying to put a good spin on bad news. And definitely don’t shy away from reporting your challenges alongside your wins. The goal of your email isn’t to impress investors — it’s to inspire trust by giving them an honest account of what’s going on at the company.
“First, any good investor will have been through the gauntlet and will know how businesses grow from nothing. There are a ton of challenges, and for a while you may have more fails than wins to report. If you lie and pretend that everything is always sunshine and roses, your investors will either know you’re lying, or they’ll think you’re delusional; neither is good,” says CEO of GrooveHQ Alex Turnbull.
When investors know what you’re struggling with, it also gives them an opportunity to offer assistance.
Ask for help
You know your investors have a real monetary stake in helping your company succeed, but they need you to tell them how. Regular updates help them become more invested, and direct asks tell them exactly what you need.
Investors have vast networks of connections. Leverage your investors’ buy-in by directly asking for their help in your email. For example, if you’re struggling to find the perfect vice president of sales, why not ask your investors to leverage their connections to help you find a suitable candidate? It costs you nothing, and it’s more effective than struggling in silence.
Aaron Harris, a partner at Y Combinator, speaks about how priming investors for help can have unintended benefits: “If your investors think about you positively and frequently, they’ll not only help you with specific requests, but point serendipitous opportunities your way. That’s one way you can ‘manufacture’ luck.”
Create an investor update template
Lower the lift on this monthly task by creating an investor update template that you simply fill in each month. Using the same format monthly is simpler, and it makes it easier for investors to find what they’re looking for.
Your report can be as creative or formulaic as you want, but you should consider including at least this basic information:
- An executive summary. A brief paragraph that sums up the past month’s performance. If this is the only part of your email the investors read, they should have a basic idea of how business is going.
- Select KPIs. Choose a handful of key performance indicators and report them consistently each month. Possibilities include total revenue, number of subscribers, or months of runway left. If possible, consider adding a chart to track progress month to month.
- Wins. Mention two or three successes your company has had in the past month. These should be brief and clear. For example: “This was our highest-grossing month to date” or “The product team successfully completed their first prototype of the new sneaker line.”
- Challenges or losses. Include two or three low points from the past month. Again, these should be straightforward and brief. For example, “We lost over 20,000 Facebook fans in one day in November. Our social media team is still trying to figure out the cause.”
- Asks. This is when you directly ask your investors for help. For example: “We are looking to connect with someone inside Twitter to discuss our verification issues” or “We are looking for an appropriate venue for our first annual meeting in March. If anyone has any personal connections, or recommendations, please pass them along.”
- Thank yous. Thanking investors who have been particularly helpful in the past month is a small way to encourage more involvement.
Use as many lists, bullet points, and graphics as you can to make your update easily readable. Most investors are short on time and unlikely to read long blocks of text. Our CEO, Russ Heddleston, likes to send his as a slide deck.
Personalize and analyze
Make your investors feel special. While you could Bcc all your investors on one generalized email, it’s better to address each investor individually by name.
Your investor updates may contain private information that you don’t want available to the public. Instead of sending them as emails, which can be forwarded and end up anywhere, consider sending your updates using a secure link.
Using a service like DocSend keeps your files more secure and gives you the added benefit of document analytics. Keep track of which investors open and read your reports to the end, and which ones ignore them. Here are some of the insights Russ gets from sending his investor updates via DocSend.
Turn a chore into an opportunity
Writing a monthly investor update is a terrific exercise in accountability — not just to your investors but to your company and to yourself as well. It’s a great chance to reflect on the trajectory of your company and your plans from month to month.
As CEO, Russ has three major goals for his investor updates：
- Succinctly give investors the updates they need to know
- Spend as little of his time as possible preparing info
- Determine which investors are still engaged
By following the tips above, you will easily be able to do all these things.
To make your life even easier, we’ve created an investor reporting template that you can use to create your own quick updates each month so you spend less time doing your “chores” and more time working on your business.