The Pre-Product Reporting Template: Early Stage Reporting explained

First, some context. We are Cavalry, a Berlin-based tech-focused venture fund that invests in early-stage technology companies, meaning our initial investment typically happens during pre-seed or seed rounds. We are sector agnostic and invest in amazing companies like Sofía, REKKI, BRYTER, Planetly, PlanRadar amongst many others. We are a team of former and current operators and have founded companies such as Delivery Hero, ProductsUp, or Plista. Cavalry is backed by 150+ entrepreneurs, giving us unparalleled network reach and an incredible amount of experience that we leverage to support our portfolio companies.

As opposed to many other “early-stage investors”, Cavalry almost always invests pre-revenue and often also pre-product. This means that our early-stage portfolio companies cannot simply send out a standard monthly investor report with a P&L and some KPIs, because there is simply not too much to report yet on that end. Instead, what we like to receive is a monthly update email, outlining the key initiatives, highlights, lowlights, product development progress, and so forth.

Until now we have also been guilty of not providing guidance as to how such an email could or should look like. Hence, this post and the below template is an attempt to rectify this situation.

I will split this post into three parts:

1. Why it is important to keep investors up to date
2. Some technical advice around investor reporting
3. The actual pre-product reporting template

With that, let’s jump right in.

Why it is important to keep investors informed

First of all, the reason an investor just invested in your company is that they are excited about what you are building. Let them (us) be a part of it! By involving your investors and letting them be a part of the process you automatically increase their buy-in, which can lead to input and feedback that is actually valuable (as opposed to no or just superfluous input).

Second, and that is very much interconnected with the first reason, investors that feel informed and understand the status of the company well, are much more likely to provide more capital in the form of a bridge financing if needed. There are many reasons why this might be required, maybe an early-stage company did not find the right product-market fit yet, that would enable them to raise their next external round, or maybe market conditions have dramatically changed (you know, COVID-19 for example). While usually not the preferred option, having investors who are willing to bridge (especially at the early stages), can be a very valuable thing.

Lastly, there is a saying that no news is good news. This is certainly not true in venture, especially not in early-stage venture. No news is almost always a sign for trouble and you want to avoid getting into the “maybe there’s something wrong with X” category at all cost. Once you are in that category, it is very hard to get out of it again.

How — The technical advice bit

While there is no absolutely correct way of writing investor reports, there are certain principles that we found to be working well.

Pre-product reporting guidelines:

• Send your updates via email.
• Stick to a regular schedule. For example, always send your update in the second week of the month for the prior month. Aim at sending out the update email on Tuesday, this way you have enough buffer if you cannot make it, while still sticking to your weekly schedule. Continuity inspires trust.
• Always put the recipients in BCC to avoid email group discussions between all parties. Updates regularly trigger some sort of feedback. You want this feedback to hit your inbox, not also everyone else’s.
• We would encourage you to simply write the content in the email. If you would like to host the content externally, for example in Notion, Google Docs, or as a Loom video (transcript!), be sure to at least include a tl;dr in your email. This drastically improves inbox searchability.
• Sending a somewhat empty email and adding the content as a PDF attachment is not best practice. These emails are often read on mobile devices and text in emails just renders better and is easier to read than a PDF.

Now that we have this nailed down, let’s move on to the actual template.

The Pre-Product Reporting Template

So, without (even) further ado, here is the template.

The first thing you will notice is that it is not really a template but rather a structure. The reason for this is that every company is unique and there is no one template that applies to all of them. But we do think that this structure is applicable to almost all situations and can be fine-tuned depending on the respective needs.

1. Subject

Choose a sensible subject that is future proof and do not change it, ever. A good subject would be: “SuperCorp Investor Update, August 2020”. Who, what, which period. In addition to being simple and straightforward, it will allow everyone to easily find your email in their inbox. For example, by searching for “SuperCorp Investor Update” I would find all investor updates in chronological order. Lastly, if your company name has a matching emoji, let’s say you are the Carrot Company, you might include a 🥕 in the subject line. This way you make it even easier to spot your emails in the inbox.

2. tl;dr

Include a tl;dr at the top of your email (after saying hi and everything). This is like a management summary, but much briefer.

For example:

Regulatory approval *seems* to be on track; we could (potentially) start in a “regulatory sandbox” to move the launch date ahead; we had a couple of super productive days with the Investor A team in Berlin; hiring is still a priority; there’s an early version of the app for your home screens.

This rather qualitative summary tells the reader what’s up and summarizes the topics you will get into as part of the main content, namely regulatory approval (ie the highlight), strategy, team, and product development.

3. Main content

Highlights and lowlights

Highlight the key things that went well and the key things that did not. We would recommend sticking with a maximum of three bullets each.

Examples for highlights:

• It’s official. Jonathan Ive is joining us as Head of Product.
• We signed a PoC with Tesla for 100k.
• Feedback on the alpha release is great and users are super sticky.

Examples of lowlights:

• Our lease got canceled and we need new office space asap.
• Linus Torvalds declined our offer to join as CTO.
• Initial load tests did not go well and we need to change the data storage.

Assuming a reader only makes it this far, what messages do you want them to remember? This is what you put in this section. For example, a “good” lowlight such as the one with the office space might actually trigger your investor to help you find a new space.

Product development

Show how your product or service is coming along. As mentioned before, making sure your investors feel that they can come along for the ride is very beneficial.

Few ideas on how to do this:

• Share a Loom video where you present the latest features or iteration of your product.
• Give some insights into your product roadmap and what is coming up next. Either write it in the email directly or share a Notion page for example.
• Did some user research or interviews with prospective customers? Perfect, write a few lines about your findings.

Team and culture

Most likely there is quite a bit of hiring going on. Share the LinkedIn profiles of your new team members to add some personality to your growing company.

Also, use this space to highlight and describe key hires that you are looking to make. Add something more than just a job title. Often a qualitative description helps your investors think of people they would normally not think of when just being presented with a job title.

Financials

As discussed above, there is probably no revenue yet, so we focus on cost and runway. We suggest you include the following:

• Cash burn actual vs plan
• Cash balance end of the period
• Runway in months and month when new financing is required

While this might feel a bit uninspiring, highlighting those figures has the following benefits:

1. For most startups, cash is one of their biggest constraints. Keeping close tabs on the cash level ensures that it is top of mind when making decisions about strategy, the product, and so forth.
2. Likewise, it will help your investor to make sure they are ready to take a decision regarding follow-on financing when the time comes.
3. It generally avoids having an awkward discussion when the company silently ran out of money and nobody really noticed it…

Others and asks

This is really just space for anything else that you may want to communicate. Also, you can wrap up your email nicely by referencing a lowlight, for example, the one used above “Linus Torvalds declined our offer to join as CTO.”, and turn it into an ask, in this case, “Help us find a CTO!”.

Make use of your investors and ask them to do stuff for you! After all, we all promised you amazing network access and whatnot, so hold us accountable!

4. Attachments

Attach anything that is either required (maybe your investors want you to attach a KPI sheet) or anything that supports your message or helps you convey an idea, maybe a product mockup or similar.

That’s it, happy building!