We recently hosted a get together of some of our founders and one of the topics that came up was investor updates. From my experience startups that set up a process to update investors effectively put themselves in a much better position to succeed.
A good investor update keeps all stakeholders plugged into key developments and therefore allows people who aren’t involved day-to-day to provide the best representation of your startup to others. An example of this is with regards to follow-on investors. Investors in your company are likely meeting with other investors who could be a perfect fit for your next round on a regular basis. At Seedcamp, we’re constantly catching up with other funds who are keen to be kept up to date with developments in our portfolio. One of the reasons I strongly encourage the startups in our portfolio to provide consistent updates is so that we can be the best advocates on their behalf to such funds. These updates don’t have to be detailed and will vary from startup to startup but the more relevant context the better. The same is true for when your investors are meeting with potential customers, BD contacts, key hires etc. Good investors will want to help and make relevant connections where they can. However, investors (particularly VCs or active Angels) will likely be working with a number of companies at any one time so the more in sync you are with them the more likely it is that you will be top of mind for any opportunities that come about.
Some founders I’ve worked with have had concerns or been reluctant to update investors when things aren’t going well. However, often this is the most important time to keep your investors well informed. Being transparent with your investors can provide them with context to help before things escalate. I’ve seen examples where startups may not be hitting key milestones (i.e. MRR targets ahead of a new fundraise) but because they kept everyone informed and explained the context their investors remained fully supportive of the company. Startups rarely if ever go fully to plan and experienced investors will know this. During the bad times is where you should lean on your investors to help. Keeping them updated enables your investors to plan for how best to assist the company and brainstorm with you. Maybe that requires a bridge round or pivoting to a different approach, either way clear and consistent updates will help your investors to best help you.