How and why to send investor updates

One of the key things that Techstars companies do during the program is engage mentors.

This ongoing, weekly engagement is important for creating cadence, and getting the most out of the program. To set the pace, companies send weekly updates with progress and asks to their mentors.

After companies graduate, we talk to the founders about continuing to send similar updates, but now to their investors.

Mark Solon, my mentor, and Managing Partner at Techstars says that sending regular updates to the investors is one of the most important things that CEOs need to prioritize. Below is a paraphrase of why Mark thinks the updates are so important.

Why send investor updates?

First and foremost, sending regular updates to the investors creates cadence and allows CEOs to execute against goals.

At a high level, after raising a seed round, most startups will aim to raise series A. The question is – what milestones does the company need to hit to be able to raise? Once series A milestones are determined, the team can work backwards to determine monthly goals and milestones. In other words, the team figures out a trajectory, that, IF followed closely every month, gets the team to Series A milestones.

Investor updates are actually a tool for the CEO to help align the team and execute against set goals.

Secondly, sending investor updates is just following the basic business etiquette and common sense – the investors gave you money and they want to know what is going on with their investment.

Lastly, and perhaps most importantly, keeping investors in the know is critical to get their support in the future.

If you raise money from investors, and next time they hear from you is 12 months when you are out of money or need an introduction to another investor, they aren’t likely to be happy and aren’t likely to be willing to help.

The reality is that most seed companies have a hard time reaching series A, and end up raising an extension or second seed. The first capital into that new raise typically comes from existing investors. That is, the very people who supported you the first time, now have to decide if they should support you again and write you a second check.

The support of your early investors is absolutely critical, because the lack of their support is bad negative signal.

It is important to understand the following dynamic. Say you are a founder, and going out to raise second seed round. You approach a brand new investor. One of the very first questions this new investor is going to ask you is – are you current investors supportive? Will they be putting in more money? If the answer is a NO – it is a red flag.

Putting it all together – investor updates are critical for CEOs to be able to execute, just plain common sense good practice because people entrusted you with their capital and are absolutely critical for the follow on financings.

How often to send investor updates?

Best practice after you close the seed round is to send the updates every 4-8 weeks or 1 to 2 months.

Sending updates weekly maybe too often. You don’t want to be the noisy company that keeps flooding investor’s inbox. If you keep sending updates too frequently, people will tune you out.

On the other hand, if you send the updates say once a quarter, then it maybe too long of a gap for investors to a) remember what is going on with you b) be able to meaningfully help if things go in the bad direction.

Engaging investors via brief, quantitative and actionable updates every 4 to 6 weeks is going to get you the right amount of attention and engagement.

The Format for investor updates

Not only you need to get the frequency of the updates right, you need to get in the right content in there.

I’ve seen a ton of lengthy updates, that are paragraphs and paragraphs without any numbers and any asks. I honestly think that these sort of updates are a waste of time.

Investors are busy and aren’t likely to read text-heavy updates, and more importantly, aren’t likely to act on it.

To make updates engaging and actionable they need to be clearly presented, mostly as bullets, numbers and asks. Here are the sections that are good to put in:

KPIs – summery of progress against key metrics you set. Include changes and graphs to help people understand the trends over time.

Asks – this section is critical, and put it in early.

Best CEOs engage investors and put them to work.

Updates aren’t a one way reporting operation. The best updates contain clear, specific asks for help, so that investors can actually make an impact on your business. Investors love it when you ask them to do work.

Also, use a trick of @InvestorName to call on individual investor to help you with a specific thing. When you don’t call on people, sometimes no one takes an action because each investor thinks that someone else will step up. Call up on people to help with different things, post questions to specific people, and you are going to get awesomely engaged group of investors.

Finances – revenue, monthly burn, runway – this is just good hygiene and common sense.

Wins and Struggles – bullet list summaries of key things that went great and things you are struggling with. Again with the struggles, engage investors and ask questions. Don’t hide bad news from your investors.

Misc/Admin – bullet list of catch all things you want to communicate.

Shout outs – another really important section. Call out investors who helped you since the last update. This creates a positive dynamic where other investors feel compelled to step up. In general, it is a good idea to thank people who are helpful

Also read these excellent posts on the topic by Ty Danco and Dharmesh Shah.

Please leave feedback and let us know what works and doesn’t work for you with your investor updates.

6 comments

  1. I laughed at your title: it is much like this article Dharmesh Shah and I wrote a few years back: http://onstartups.com/tabid/3339/bid/98311/The-Why-and-How-Of-Updating-Your-Angel-Investors.aspx Needless to say, we agree on all points with you. We also included a companion template, perhaps slightly longer than yours, but still cut from the same cloth: https://tydanco.com/2013/05/17/the-investor-letter-template/

    Good to see the classics updated, Alex!

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    1. Thank you, Ty! Just included the links.

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  2. Awesome post! Don’t forget to include the BAD news too. If your updates are always all roses, they will lack credibility. We all have good and bad so be honest and include both!

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    1. Good point, Troy. I just clarified in the post.

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  3. Agree with all this. My first ever blog post was on this topic.

    https://ethansaustin.com/2011/09/05/the-key-to-investor-relations-purposeful-engagement/

    The one thing I would caution is that I think it’s hard to win over the hearts of your investors if you are only sharing short bullet points with them. I think it’s better to do a heads + hearts strategy. The top section of your investor update should be the TL;DR with your big headlines, bullet points, KPI’s, financials, and asks – something an investor can scan in 60 seconds or less from her mobile phone.

    Below the fold I think is where you win over their hearts with a mix of analysis, storytelling, and strategy. [read paragraphs].

    By lifting up the curtain and giving them an honest and oftentimes vulnerable glimpse into your head and heart, I think this is where you form real relationships with your investors.

    Truthfully, half of your investors will probably never read the bottom half of the update (and a minority of them will likely tell you it’s a waste of your time) but those that do read the bottom half will appreciate you greatly for taking the time to do it.

    The bottom half matters if you are not crushing it. If your top half [KPIs, financials, etc] are kicking butt, it really doesn’t matter whether you win over their hearts. But if you are in the 90 or so percent of startup who are neither ‘crushing it’ nor failing, then the bottom half of your investor update becomes increasingly important.

    People invest in people they feel connected to. If you win over enough of their hearts, you’re giving yourself a shot to raise another round even if the numbers aren’t quite where you want them to be.

    PS – also agree 100% about being consistent. One of my biggest regrets as a founder was becoming inconsistent when it came to investor updates. In year 1 we did them once a month. Year 2 it became once every other months. By year 3 it was once a quarter and because of it I think relationship and trust suffered.

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    1. Great point Ethan, yes, analysis if done well and coherently can be super helpful. It really depends on the group too. Want to take a pulse and really see how people engage. KPIs + text => Okay. Just Text with no KPIs ==> No okay 😉

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