Please Communicate with Your Investors!

By Jessica Droste Yagan

Many entrepreneurs don’t prioritize communicating with their investors… and that’s a mistake. At Impact Engine, we know how important the investor-entrepreneur relationship is. We have our own investors in our fund, dozens of investments in portfolio companies, and have supported many entrepreneurs in managing relationships with their other investors. We also know that when investors are out of the loop, they can get disengaged or frustrated. When something inevitably goes wrong in your business, investors will be more skeptical about your ability to handle it, and less likely to re-invest. On the upside, when investors are in the loop and engaged, they can add a lot more value. Many investors will go out of their way to help if they know what you need.

We’ve observed some best practices in investor communications that we thought would be valuable to share. If you’re an investor, you could share this with CEOs that may not be communicating well. If you’re an entrepreneur, we hope you can take something valuable from this and use it to your advantage.

Err on the side of transparency (at a high level).

While there really are no rules about what should be included in an investor update, there are definitely some key pieces of information that you should be communicating. First, always include the quantitative metrics that actually drive your business. Information like bookings, revenues, customer engagement, and customer retention (depending on your business) are required. Generally, there’s no need to include level of cash flow and runway with those outside of your board, but you should give investors a heads up if you will need to raise funding earlier than anticipated.

While qualitative storytelling is not sufficient alone, it adds a lot to the update as well. Include an honest overview of how things are going, but with some color so the update comes alive. If you’re an impact company like those in our portfolio, make sure to include your impact.

Stay organized.

Make sure to pick categories and stick with them. Investors will appreciate updates that are consistent, comprehensive, and categorized. Each company in our portfolio has a unique approach to investor updates. For example, Skill Scout, which is focused on connecting job seekers in underserved populations to manufacturing roles, includes graphs that shows monthly revenue, as well as screenshots of updated products and services to give investors a sense of how their product is evolving. ThinkCERCA, a critical thinking literacy platform, includes the team’s quarterly goals and a “We’re Hiring!” section that links to open positions at the company.

Don’t miss your chance to ask for support.

Speaking of help, one of the most important things to include in an investor update email is an ask. Hopefully you chose investors who could add value beyond their check and want to know where they can add value with their time, talent and network. Outline 1–3 strategic asks to include in every email update — the more specific the ask, the better! For instance when ThinkCERCA includes links to open positions, they also remind investors to spread the word and send them candidates.

Choose a cadence and stick to it (most of the time).

There is no particular requirement for timing of updates. Most importantly, you should pick a cadence that makes sense for you and stick to it. Some of our companies send one email at the end of each month, some opt for sending more thorough overviews each quarter. More than a quarter in between updates is too long for an early-stage company. Pick your cadence based on how fast your business is moving — the more quickly things are changing, the more frequent the updates should be. As a general rule of thumb, investors would rather hear from you too much than not enough. If something negative happens with the company, like the departure of a key executive or a material customer contract that falls through, your investors should hear it from you first. And by all means, if you have really exciting news, add a quick note in between updates so they’re in the loop!

Actively engage and follow up with stakeholders.

The goal of sending investor updates is ultimately to engage them — you want them to understand what’s going on and act in ways that support you. Be prepared to follow-up when investors have questions, especially when they make an introduction on your behalf. If you drop the ball, they’ll be unlikely to use their social capital on you in the future.

If you want to streamline the follow-up or try to create more community among your investors, you could try a tool like Reportedly, an online platform and database that helps compile status reports for team members and investors. Investors are emailed when a report is added, can view past reports and are allowed to make direct comments on each update. This allows investors an opportunity to engage not just with the entrepreneur, but also each other.

Another great way to engage is to supplement your written updates with calls or meetings, in person or by phone. One of our portfolio companies has a quarterly call for all investors to ask questions about the updates. It saves them time to do it all at once and helps the investors get to know each other as well.

Learn and improve!

Nothing will ever be perfect (if you’re an entrepreneur, you already know that!), so don’t let perfect be the enemy of the good. The most important thing is to get started, and based on your company and your investors, make adjustments over time. Refining the communication channels between entrepreneur and investor is definitely an investment worth making!

Here are some other articles on investor updates that are worth looking at as well:

What other tips can you offer entrepreneurs? Please share!