Are you an entrepreneur? Take my one advice to your heart - you are constantly raising funds! It doesn't matter if you're just starting or have raised millions in your recent series B; you should always be in the pre-investment phase. Why, you ask? Because you never want to raise funds when you desperately need them.
With this context established, let's talk about a topic that's been the talk of the town in several tweets, articles, and blogs: Investor Updates (Kindly play dramatic music in your mind to capture my sentiment 😀) Do you know that sending regular updates to your investors can do wonders for your business? It's true! But, many founders don't send them, and that's where they go wrong.
Trust me, I can understand the pressure of running a startup in its early days! You wake up and realize you're already late for your standup? Your laptop is buried in your bed, and you've got a bunch of text messages from investors or accelerators, but you can't remember which version of your deck you sent them. It's a brutal way to start the day, but it happens to the best of us!
Looking back, I wish someone had emphasized the importance of sending regular updates to investors. As a first-time founder at just 25 years old, I set out to revolutionize the education system in India. While I'm sure others have attempted similar feats, I wanted to share my journey and the lessons I learned along the way so that fellow entrepreneurs can benefit from my missteps over the 7-year journey.
Why?
I’m sure you must be wondering by now why it's essential to keep your investors in the loop with regular updates. It's understandable if you feel like it's just another task to add to your already busy schedule. After all, running a company is a lot of work, and keeping investors informed may not seem like a top priority.
However, here's the thing that you might not realize: investor updates aren't just for the benefit of your investors. They can actually be incredibly helpful for you and your team too! Not only do they foster clarity and effectiveness in leadership, but they also help establish a rhythmic workflow with your team and maximize the utility of your capital.
It's actually a great way to step back from the day-to-day chaos, reflect on what's happening, and share your insights with others. Plus, it's a chance to improve your communication skills, which are so important for any leader.
Did you know that Jeff Bezos and Warren Buffet started writing investor updates long before they were successful? It's true! And they didn't start out with perfect letters, but they practiced a lot and got better over time. So, if you have ambitions of writing epic shareholder letters someday, why not start today? You never know where it might lead!
And if you're still not convinced, here are some additional points that might change your mind:
- Keeping your investors informed fosters trust and alignment, which can lead to them becoming staunch advocates for your company. This can be especially helpful if challenges arise, as they'll have the contextual understanding to assist you in course correction.
- Investors have extensive networks that they can leverage to help you with things like recruiting talent, forging press connections, and introducing you to domain experts.
- Your investors likely possess operational or domain-specific knowledge that can be incredibly valuable when you're trying to gain insight into unfamiliar territories.
- Positive and frequent thoughts about you from your investors can lead to specific assistance and can even bring fortuitous opportunities your way. It's a method of "manufacturing" luck!
For Whom?
Your investors, of course. But who else? Potential investors. Advisors. Anyone you trust who has vowed to help you through strategic conundrums and product predicaments. You don’t need to send the exact same update to every audience. In fact, there’s likely some proprietary information or internal metrics that you want to reserve only for investors and the board. But a simple redacted version is enough to keep those other interested parties in the loop and engaged.
Let’s get the easy one out of the way: You’ve finally secured funding. Phew. You can put that pitch deck to rest — for the time being. For now, you have investors. You must buildd and nurture a relationship with them, and a key part of that is sending regular investor updates on company performance.
Indeed, informed investors are not only happier but also more helpful. Regular updates set the stage for participation, not just dispersing information. They also may help you secure funding in the future. By staying top-of-mind for your current investors, you increase the chances that they will think of — and refer — your company to their colleagues.
But how do you update them about what you’re accomplishing with their money? What do you include, how do you portray it, and how often? Here are some best practices, recommended by trusted thought leaders and VCs around the web. That’s what we will discuss in the next sections.
What to Actually include?
Sending investor updates can feel daunting, but It's important to remember that updates are only valuable if they actually contain valuable information. Nobody wants to receive spammy updates that don't provide any real progress updates.
Think about all the newsletters you receive. You only read the ones with amazing content, right? The same goes for startup updates. The frequency of updates depends on how much progress your startup is making. Imagine you were emailing someone you really respect, such as Elong Musk, Bill Gates, or Jeff Bezos. You would want to make sure your updates are top-notch.
So, before sending out an update, ask yourself if you have anything valuable to share. Don't send an update just for the sake of sending one. Keep it real, keep it valuable, and keep your investors engaged!
Here are some of the most valuable tips on sending investor updates:
1. Clear Financial Snapshot
Two metrics matter in the early days: growth and cash/burn. Begin your investor update with a crystal-clear financial snapshot. Investors crave transparency, so provide a concise overview of your financial performance. Utilize graphs, charts, and tables to present data visually appealingly. Highlight key metrics such as revenue growth, profit margins, and any significant financial achievements.
If you’re not tracking these metrics internally, you should be. Simplify this process by building a company dashboard. Investor updates are simply a forcing mechanism for staying organized.
Bonus: Use charts to better show change over time and supplement with qualitative context.
As your company grows, additional metrics might become relevant:
- Monthly active users (MAU) to measure engagement
- Margins to gauge the long-term health of your business
- NPS scores
Starting this way keeps your investors informed and establishes trust and confidence in your organization.
2. Context
Provide context around each metric so the investor can easily comprehend its trajectory. A simple number doesn’t mean much when presented in a vacuum.“Clear data leads to productive conversations,” says Tunguz.
So, what’s the right amount of context? Include other data, such as the previous month’s number, the current month's number, the current goal, and the next month’s goal.
You could also provide a visual for the key metric you want to highlight. A good option is a chart that displays Monthly Recurring Revenue (MRR) movements: new business, expansion business, reactivation, churn, and downgrades. ChartMogul, a tool to track and analyze SaaS metrics, offers an MRR movement chart that visualizes all these revenue points.
3. Strategic Initiatives Update
As an investor, you're probably curious about your company’s strategic direction. That's why you should share an update on some of the exciting strategic initiatives you've undertaken during the reporting period. Investors must feel that from entering new markets to launching innovative products, you've been proactive in pursuing our objectives and making progress.
4. Operational Highlights
You also want to highlight your operational excellence, including cost-saving measures or milestones. Of course, no business journey is without its challenges, but you want to assure your investors that you have risk mitigation strategies in place to navigate any uncertainties.
5. Market Trends and Competitive Analysis
You should also show that you’re keeping an eye on market trends and conducting thorough competitive analysis to ensure you’re staying ahead of the game.
6. Future Outlook
Finally, you must end on an optimistic note, saying that you are excited about the future and want to share your guidance and projections for the upcoming period. You must give an impression that you are excited about what's to come and are grateful for their continued support.
Conclusion
In conclusion, the journey of an entrepreneur is a perpetual fundraising endeavor, regardless of the stage your startup is in. The crucial advice I'd like to imprint upon you is this: never stop being in the pre-investment phase. Why? Because fundraising should never be a reactive measure born out of desperation.
When done right, investor updates contribute significantly to building trust and confidence. So, write updates. Keep them short, to the poin,t and on a regular schedule. You’ll be surprised how friendlier your investors can be when you treat them as part of the team.
What are your biggest challenges when it comes to communicating with investors? Drop your thoughts in the comments, and let's unravel the solutions together! 🚀 #StartupInsights #InvestorRelations
Sources:
- Drive More Online Traffic: Mastering Image Geo-tagging for Car Dealerships - Dealer Authority. https://dealerauthority.com/geotagging-images-for-auto-dealers/
- Investor Updates: What You Need to Include | MAGNiTT. https://magnitt.com/news/investor-updates-what-you-need-include-16199
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