Investor Updates: Dos and Don’ts

Since publishing Minimum Viable Investor Updates almost three years ago, I’ve processed thousands more updates. We finally hired someone to take over this task a few months ago and, as part of the knowledge transfer process, I’ve been thinking a lot about how startups could improve their updates.

I’ve come up with a list of Dos and Don’ts that you can apply to your current updates, whether you’re using our minimum viable format or not. Consider it the distilled wisdom of someone who has likely processed more startup updates than any other investment principal on the planet.

Getting It Done

  • Do Start Small. A lot of founders, riding a wave of initial enthusiasm, start off writing huge, detailed missives… for a couple of months. But few can keep up that pace while running a high growth business. Then, in their own minds, they’ve set the bar too high and struggle to meet those self-imposed expectations. Better to start with a small, core update. Build the habit. Add to it incrementally. Same advice as for starting an exercise program if you want to get long-term results.
  • Don’t Let the Perfect Be the Enemy of Adequate. Founders tend to be goal oriented, and those goals tend to be big. Many seem to have a vision of the perfect update in their minds–capturing all the excitement, possibility, and heartache they’re experiencing. That’s a lot of pressure to put on yourself every month while staring at a blank page. Especially with all the other demands on your time. Let yourself off the hook and and come up with a very basic template you can fill out in 10-20 minutes (see the Minimum Viable Investor Updates post for ideas).
  • Don’t Fall into a “Shame Spiral”. Often, it seems founders miss an update, then feel like the next one has to be even better. Which makes the chance of delivering it lower. Which means the next one has to make up for two missed updates. And so on. Again, let yourself off the hook. Offer a brief apology, go back to Step 1, and Start Small.

Getting It Read

  • Do Send as Email. Email is the least common denominator. All investors have it. Nearly all investors have evolved a system for organizing email that works for them. There are lots of tools for managing email lists. Don’t use Google Groups. Don’t use Slack. Don’t try completely new platforms like Telegram. Feel free to use other platforms in addition to email. But put your core updates in email. (Yes, I can provide detailed reasons why each alternative platform is inferior but they all essentially boil down to standard least common denominator platform arguments.)
  • Don’t Put the Content in an Attachment. Honestly, I don’t understand why founders attach updates as PDF, Word, and PowerPoint. Sure, supplementary material is fine in those formats. But we receive a lot of updates where the founder has clearly written a specific update document and attached it as a file. Forcing the opening of a file just introduces friction and attachments break/slow some forms of searching. One founder said he felt it was more secure. As a former security guy, “Uh, no.” Note: there is an exception here. If the choice is between not sending a useful update at all and sending a pre-existing file like a Board deck or pitch deck traction slides, go ahead and send the file.
  • Don’t Rely Solely an Online Service Like Reportedly. Anything that requires a logon introduces friction. But it also causes particular problems where partners in a firm jointly help portfolio companies and/or have a process for actively synthesizing a view of each portfolio company’s state. You don’t want a process that makes it hard for multiple people at a firm to look out for you. If you really want to use something like Reportedly, perhaps to manage discussions, copy the body of the update into the email as well. Note: if you want to centralize your detailed financial reporting as part of your accounting system, that’s fine. Just link to it from your update emails.

Maximizing Usefulness

  • Do Put Metrics Up Front. Most founders seem to think the metrics are the punchline, but they should be the preamble. First, for the same psychological reasons that you want to put your traction up front in a pitch deck, as I explained in Your Pitch Deck is Wrong. Second, purely from a practical standpoint, if an investor is short on time, the metrics give the most information. Third, the metrics provide useful context for absorbing all the other information. Traffic shot up? I’m looking forward to finding out why. Burn spiked? I’ll expect an explanation. CAC and LTV both went up? This should be interesting.
  • Do Include Financial Metrics. Financial metrics are your startup’s basic vital signs, like pulse and blood pressure. It’s really hard to maintain situational awareness of how things are going without them. Always provide Net Burn and Ending Cash. If you’re generating revenues, provide revenues. Better yet, break it down as applicable: recurring vs one time; COGs vs margin, inbound vs outbound, etc. Whatever is most relevant to your current situation. But please don’t use non-standard or ambiguous terms without defining them. If you’re not generating revenues, provide some indication of what the timeline is, whether it’s a target shipping date for revenue generating product, details of where prospective customers are in the pipeline, etc.Note: some founders think that financial metrics should be confidential. Not from people who gave you money! If there are people on your update list who are not investors and you don’t want them to know, split the distributions. If this sounds like a hassle, go to Step 1 and Start Small.
  • Never Just Provide a Percentage Change. Perhaps even more frustrating than no financial metrics at all is seeing just a percentage change. Again, the motivation here seems to be confidentiality, but my same response applies. Statements like, “User acquisition costs dropped by 30% last month,” or, “Revenue rose 30% last month” are not only useless to your investors, they are extremely frustrating. The goal of your update is probably not to frustrate your investors.
  • Do Provide Values as Well as Graphs. Graphs are great! But often the graphs will have weird scales or multiple scales or be generally hard to read. So if you graph a quantity, be sure that each point is either clearly labeled with the corresponding value or also put the values for the most recent period in text below the graph.
  • Do Provide Fundraising Details. Investors can often help with fundraising. If not this round, then maybe the next one. We also like to get validation that our previous investment is appreciating! So knowing exactly where you are in a raise or where you ended up at close is important. If you’re raising, report the target amount, the target/hoped for valuation (range is fine), how much you have committed, how much closed, and from whom. If you’ve completed a raise, report final total, final terms, and final participants. And again, don’t use non-standard or ambiguous terms like, “We secured $500K from [firm].”  What does that mean? A verbal promise, a written commitment, signed investment documents, a check?
  • Do Organize Content into Digestible Chunks. Paragraphs of unbroken prose or lists of unbroken bullet points are hard to digest. Use descriptive and logical headings to group related information together. Never have more than three consecutive paragraphs of prose–and only then if the paraphs are reasonably short. Never have more than seven consecutive bullet points. Only have more than three consecutive graphs if they’re all closely related and seeing them together is necessary to provide a coherent picture.For reference, here are the sections we use in our internal app for summarizing company updates:
    – Metrics
    – Fundraising
    – Team
    – Business Model
    – Product/Engineering
    – Customers/Sales/Channel
    – Miscellaneous

Of course, you may have specific circumstances not addressed by this list. In general, it helps to have a model of what you’re investors are looking to get out of the updates. First, remember that they are looking at your company mostly from the outside and can’t possibly have all the context you have. And there’s no way you can load it into their heads in a reasonable period of time.

Second, investors want to be helpful if possible. But you don’t necessarily know if you need help or the best way each investor could help. Experienced investors actually have more context than you on how startups in general develop and the challenges they encounter. They obviously have more context about their own capabilities. So the best path is to give them a high level and reasonably transparent view that both maintains consistency over time but also notes “inflection points” when you think you hit them.

And you should always feel free to ask investors what they’re looking for.

However, the absolutely most important thing is to send out an update regularly. Your investors and their extended networks are a valuable asset–but only if they are up-to-date on your company. If you have 6 investors, and they each give you just a single strategic introduction every other year, that’s 3 extra opportunities per year for good things to happen. You could be missing out on introductions to acquirers, channel partners, next round funders, experienced potential hires, relevant advice, and much more. All because your investors don’t know what’s going on with your business. Can you really afford not to put this free upside in play?

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