This one trick will greatly increase the likelihood of your startup’s success
I’ve never written a click-bait headline before, but I feel so strongly about this “trick” that I felt it was warranted. Thankfully I won’t keep you in suspense and make you read until the end before revealing the punchline. So here it is: send monthly investor updates. [link below to my favorite template]
A lot of people have written about why it is a really good idea to send monthly updates, but since I still don’t see anywhere close to 100% of startups doing it, I figured it was worth adding my two cents. Also, now that I have this post I can forward it to new Ground Up portfolio companies to show them just how much I love (and expect) monthly updates.
“There seems to be a correlation between quality and frequency of updates and the goodness of the company and founders.” Aaron Harris, Y Combinator
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Communication is a fundamental aspect of any relationship. This is true of marriage and friendships, and it also applies to the relationship between startups and their investors. If you are not talking, or at a minimum exchanging information, then you are not engaged in a relationship.
The best, most efficient format for keeping your investors in the loop (assuming you have more than a couple of investors) is with a monthly email update. Every founder who sends monthly updates swears by it and every investor who receives them loves them, so why doesn’t every founder do it?
The three most frequent points of pushback I hear are: (1) it takes too much time (2) at our stage there isn’t that much that changes month-to-month (3) if I start sending updates then I will also have to send updates in months when I only have bad news to share. Here is why those are bad reasons for not sending a monthly update:
- There are many good templates out there for monthly updates, so there is no need to spend time reinventing the wheel. And once you have a good template set and you get through writing the first update, the subsequent updates don’t take very long. Counterintuitively, investor updates actually save you time because consistent proactive updates set expectations for the cadence of investor communication and help stop inbound, asynchronous one-off update requests which are a time suck for founders.
- No matter your stage, there should be enough that changes month-to-month. If you are using your time and resources wisely, then you should be making progress on one or more fronts (sales, product, r&d, hiring, pr, business development, etc.) or at the very least learning lessons from mistakes that kept you from making progress, which is in itself a form of progress that is worth reporting. Not to mention that one of the many benefits of monthly investor updates is that once you start sending them you will do everything in your power to make sure that not a month goes by without update-worthy progress.
- When things aren’t going well, that is precisely when communicating with your investors is most valuable. Some founders are afraid to share bad news, but they shouldn’t be: your investors expect to hear bad news and would rather hear it sooner rather than later so that they at least have an opportunity to try to help make things better. But won’t sharing bad news make it harder to raise follow-on money from your investors? If you have smart, professional investors then they will discover the bad news before writing you a follow-on check anyways, so what is the point in delaying the inevitable. Rather, score points with the investors by being transparent and communicative between rounds, making them feel like a part of your mission, and enlisting their support in fixing the problem before you need to raise from them again.
So now that you have no more excuses, just do it. It is the best way to get your investors to help you, to feel apart of your mission and to want to continue to fund you. But perhaps even more importantly, it is the best way for you to hold yourself accountable and to take a step back each month to reflect on the prior month and to think about where you would like to be in the months ahead.
Bibliography & Resources:
- Recommended template: A Fill-in-the-blank Investor Update Template for Busy Founders via Hackernoon
- Why Investor Updates Are Really Really Important
- Investor Update Email Template
- Template for the Perfect Investor Update
- Email template for investors monthly updates (SaaS version and ecommerce version)
- Investor Updates
- Every seed stage founder should send monthly investor updates. You can make the time.
- How to write a perfect investor update
