How Often Should Entrepreneurs Update Investors
We found that entrepreneurs are poor at updating their investors. Some angels haven’t seen or heard from them since they collected the cheque! On the other hand, you have so many fires to put out, who has time to update investors? But before we get into “How Often” we thought it would good to highlight “why” you need to update investors.
Why send updates
The first thing entrepreneurs need to understand is that money is a limited resource. Those who are investing their personal wealth in this country had to work extremely hard. They had to face challenges that today’s entrepreneurs don’t have to face (e.g. civil war). Hence, always respect them and never judge them for their lack of understanding of your idea. It’s most probably because you didn’t communicate it right!
Secondly, the Sri Lankan startup ecosystem will not be anything like Silicon Valley. We don’t see a future where investors write open cheques to entrepreneurs. And we also don’t think they should. Especially when funding is scarce. Also, the number of investors won’t grow at the same rate as the number of entrepreneurs. Emerging markets such as Sri Lanka which are just kicking off, need to focus on a few failures and few big wins. This is different from markets such as the U.S. where you have few big wins while many fail.
Building a startup is hard. Everyone knows this, including your investors. So sharing the good, bad & ugly helps you stay on top of their mind. Even if they don’t read your email. Also, you avoid looking like an a**hole if you only write to them when you need money.
2. Remove roadblocks
When you share regular updates, investors know that you’re hustling. They can easily offer quick solutions to some of the operational challenges you face. For example, if you onboard a client effectively, they are more like to introduce more.
3. Build a relationship
The more insights you share with your investors, the more they would know about the business. And the more they would talk about it with their peers. This will help you in future fundraising as your existing investors will become promoters.
Probably the most important reason to share updates is to gain a fresh perspective. As you’re heavily involved in operations, the outside perspective helps forge your vision. As investors learn how important the startup to you, they begin to contribute. Most entrepreneurs avoid sharing updates because they are rolling cash or faking the KPIs. If you are, sooner or later, the investors are going to find out. And when they do, credibility is lost. Not only for this startup but for any startup you do in the future. And remember, Sri Lanka is a small market, everyone is someone’s uncle or aunt!
The objective is to update not spam. We recommend all our portfolio startups to share updates once a month. The updates are broken into two, performance KPIs & financial KPIs. These are accompanied with the good, bad & the ugly in point form. If you require specific needs/help, include them in point form as well. By selecting a particular date of the month, this can be automated using online tools. And update everyone, all the shareholders, not just the board. Basically, include everyone that has given you money irrespective of the amount.
Also, you should meet with everyone (board+shareholders) at least once a quarter. Building this practice to your operations and documenting the same, adds value. Future investors see that you’re responsible and transparent, which is a major plus. People such as Warren Buffett & Jeff Bezos are renowned for their annual shareholder letters. It gives you an opportunity to reflect your learnings and accomplishments. Don’t miss out on this opportunity to demonstrate why you will become successful!