You’ve finally secured funding. Phew. You can put that pitch deck to rest — for the time being. For now, you have investors. It’s imperative that you build and nurture a relationship with them, and a key part of that is sending regular investor updates on company performance.
Every investor that owns >=3-5% should be fully in the loop on what’s happening in the company until you are so big you don’t need any capital anymore, or their capital is irrelevant. They deserve this, and you may get burned if they get out of the loop.
— Jason Lemkin
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.
Investors network frequently, work together and have long term relationships with each other so a referral should go a long way.
— Tomasz Tunguz
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.
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.
The generally accepted rule for investor updates is once a month. There are varying opinions, though, from once a week to once a quarter. So it may just be a preference set between yourself and your investors. It also may depend on the stage of your company. Here is what Jason Lemkin has to say:
Until you are at Initial Traction, every investor that can possibly help you should get a monthly update. Even if they only invested $10k. Otherwise, you won’t get the help.
Even if you think you have no news or bad news, send the update anyway. There’s still plenty of value for both you and them. “No news,” the status quo, is still valuable information, and bad news creates an opportunity for investors to advise you. Plus, the consistency of these updates demonstrates a lot more than just the content within them:
And all of the above will look attractive to potential investors, as well.
Short and focused. Here the opinion is unanimous. Investors, like you, don’t have a ton of spare time. So it’s in both your interests to develop a simple but comprehensive template, containing all crucial information, so that takes no more than a minute or two for them to scan and perhaps half an hour for you to populate.
Note: Christoph Janz recommends a one-slide update for board meetings which you can adapt to email.
The suggested format of the slide is the “Progress, plans, problems” framework, which Janz adopted from Seedcamp:
Let’s break this down a little further.
In one sentence. This not only serves as a refresher for overloaded or distracted VCs, but is especially important — particularly in the early stage — when your product or target market might shift. Can clearly re-define and communicate that here. If your shifts are more significant, closer to a proper pivot, then you should expand more and explain thoroughly in a correspondence dedicated to that subject.
Tailor these to suit the type and stage of your business, as well as the preferences of your investors. Most investors agree that they primarily want to see the answer to this question: “Where is the money?” So listing cashflow, runway and burn rate as a top line summary is a good idea.
Beyond that, Tom Tunguz recommends ten metrics that span three areas: distribution, engagement, and revenue. But again, pick and choose what’s relevant for your business.
Is your company pre-revenue? Then you could include other numbers and information, such as headcount and staffing developments, product progress, etc.
Provide the necessary 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, the current goal, next month’s goal.
You could also provide a visual for the one 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 of these revenue points all together.
Last but certainly not least, you must ask for help. Choose between 1-3 strategic asks. It’s possible your investors don’t have time to help you — but if you’re staying top of mind, it’s also likely they’ll think of you when they come across someone who can help! They’ll remember who you are and what you need.