❤️️ Investor Updates
I love a good investor update. As a venture capital investor, I spent a lot of time both writing and reading investor updates, and there are always ways to make them better.
But this post is not about the how of investor updates, it is about the why of investor updates.
High quality investor updates are good for the team writing the update, good for the team reading the update, and it turns out they can also be good for society. On this last point, we want to share something we have started to do at Fresco Capital, and our goal would be that every team reading investor updates copies us. More on that below, but first, let’s start with why an investor update is good for the team writing the update.
Why ❤️️ Writing Investor Updates?
Writing investor updates is definitely the harder end of the process. We write quarterly investor updates with a team effort. The process is important and helpful for several reasons.
First, it forces us to distill our thoughts, including the performance of our portfolio companies, into short summaries. Investors are busy people, and complex issues need to be clear.
Second, it creates engagement, feedback, and accountability with our investors. These are smart people, and it makes sense to learn from them. We value their input and look for ways to implement feedback.
Thirdly, writing investor updates creates a semi-public timeline of our views and actions. It is extremely helpful to go back in time and review the updates from last quarter, last year, and even several years ago. We can clearly identify how our ideas and actions have changed over time.
This is not only useful for running a venture fund — these benefits apply to running a startup, or even a large company.
Why ❤️️ Reading Investor Updates?
Reading investor updates is likely an under-appreciated art.
There are three possible outcomes from reading an investor update.
In many cases, the outcome is to do nothing. While doing nothing seems negative at first glance, especially in relation to startups which are always filled with frantic activity, it is worth appreciating the positive value of nothing as well. Doing nothing allows for more focus. And for startups especially, giving someone the opportunity to focus is a gift.
The second possible outcome from an investor update is the worst, which is an investor who does something that ends up wasting time or other resources. People naturally want to help, but it is not always easy to figure out exactly the right help at the right time in the right way. Rather than emphasizing the quantity of support as if more help is always better, better to hone in on the quality of support.
This leads to the third outcome, doing something useful. When people ask if we are hands-on or hands-off investors at Fresco Capital, my answer is: yes. If we think we can add value, then we will do so proactively. If a founder asks for our help, then we will not simply rush in to do the simple task at hand, but also take a step back and potentially even do much more work. If we need to give some tough love, we can have that conversation as well. In the case of venture capital, a missed opportunity to add value could be worth millions, or in some cases potentially billions — so that is an expensive opportunity cost.
Sometimes the best thing is to do nothing, and sometimes the biggest mistake is to do nothing. It depends on the context. And knowing the difference really is an art rather than a checklist or a machine learning model.
Why ❤️️ Society for Investor Updates?
During 2020, we asked ourselves if there was a way to build in positive social impact into the process of investor updates, and it turns out the answer is yes.
We decided to create the Fresco ❤️ Award. Each quarter, we choose one Fresco portfolio company who truly does an excellent job of investor communication (overall communication, not only written updates), and make a donation to the company’s choice of non-profit (plus of course the team gets bragging rights).
So far, we are thrilled to have supported 826 Valencia, focused on supporting under-resourced students with their skills and confidence in writing, and SoCO, an organization helping members of society who are the most lacking in resources and support.
Having completed two cycles of this quarterly process, we want to both share the idea and also have others improve on it. Imagine if every investor update in the world could have direct positive social impact.
So feel free to copy us and also put your own positive twist on the idea. Even something as simple as investor updates can make the world a better place at scale.
