Duet Partners
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Investor Updates - the most underused tool in the box

12th October 2019

No news is bad news

One of the easiest and most underrated skills that a startup CEO needs is knowing how to keep investors updated, motivated and engaged. A short monthly update is one of the most effective ways of keeping investors up to speed. Yet many founders have deep anxiety about divulging company information, especially during the formative stages of company building when everything seems so uncertain. This should be set off against the greater benefits of keeping investors firmly in the loop. How to get started?

Investors deserve updates

One of the big pet peeves of early stage investors, especially Angels, is that companies fail to provide regular progress updates. They invested in you, handed over their hard-earned cash to support you, and now you’re ignoring them. Not only does this stir increasing investor resentment but it’s also missing a trick. Often investors are well placed to help you on all sorts of issues, not least raising that next round of capital.

You may, however, have misgivings about sharing company information beyond your immediate management team and board. Perhaps you are anxious that shareholders may use this as ammunition to question your plans? But in the investor world, no news is bad news. Sooner or later you’ll need their support. If the only time you talk to them is when you need more money this will always be a much more difficult conversation.

Investors can be one of the company’s greatest assets. They are totally aligned with you in your ambition to build a great and valuable company. They want to be part of your journey. If you have serious doubts about this then you may not have selected the right investors in the first place!

Why are updates important?

A regular update enables you to foster good investor relations. When you started out you may have only had a handful of private investors backing you so updates could be done in person. Now that you are growing and the shareholder register is expanding, a more efficient and scalable approach is needed.

A written update via email is the natural choice. If you keep these communications open, honest and regular, you will engender trust and develop a great resource for the future. By making yourself more accountable, you will inspire greater confidence and belief amongst your investors.

Most importantly, an update allows you to show momentum and build understanding about the journey ahead. Not only does this develop mindshare but it gives investors a certain pride to hear how you are using their money to good effect. During more difficult times it also allows you to share challenges and plans. Any serious investor knows that building a business can be a rocky road but keeping investors in the dark until you’re about to career off a cliff is never a wise move. Investors hate these kinds of surprises!

Several companies I have worked with also use their investor updates to reach a wider audience. Not only do they send their updates to existing investors, but they also include their professional advisors, mentors, and other stakeholders. A few also include a select list of prospective investors that have expressed interest in getting to know the company better. This can be a really powerful way of gradually warming up key funds that may be keen on investing at the next stage.

What should I include in the update?

The content should evolve as the business matures. Seed stage businesses will have different things to talk about than those at Growth stage. At the very early stages these updates can be quite conversational, but as the business develops they need to become more factual and metric focussed. Here is my take on what should (and should not) be included:

At Seed stage:

  • Headline summary – remind them what you do!
  • Cash position/runway (in months)
  • Early customer engagements
  • Product status
  • Team & Hiring
  • Press news
  • How they can help?
  • Thanks

Putting your cash position and anticipated runaway at the top underlines that cash is king and managing it is your priority. Always a great start.

If you are ready to share your funding plans for the next stage, outline these too.

Giving some insight into early adopter engagement is comforting as it reinforces that you are on the journey through ‘Problem/Solution’ towards confirming ‘Product/Market fit’.

Team news and hiring plans make the update feel personal. Include photos of new faces. Consider embedding a video clip to introduce key hires.

Don't forget to ask for help – perhaps in relation to finding new people or getting intros to other businesses or investors.

And last but not least, say ‘thank you’ to any investors that have been particularly helpful in the last month. Everyone loves a name check.

At Venture stage:

As you start to generate more commercial traction (users, revenues) you should add more insight into key metrics and early financial progress. Slim down on the wordy narrative and change gears to a more concise summary.

At Growth stage:

Now your focus should shift more onto overall financial performance. Also keep in mind that as the company grows, bigger investors will be granted information rights at which point you may need to curtail your updates to the wider audience.

Frequency, format, and length

If you haven’t sent out updates before then the thought of going monthly right from the start might seem daunting. Don't worry. Just begin doing them occasionally but try to build up a pattern – at least quarterly. By venture stage aim for monthly and then stick to this. You'll become more and more efficient at doing this over time.

In terms of length, there are no golden rules here but if you are starting out aim for a 4-minute read - around 800 words max. Diagrams and photos can break it up and keep things light.

Find a format that reflects your company and your personal style. Be consistent in layout and don't forget to correlate progress with earlier plans. The easiest way to do this is set up a template in an email marketing tool like Mailchimp, but remember;

Don't overdo it and make it look like a marketing mail shot. Be concise.

Don't forget to highlight your challenges. Be open.

Don't sugar-coat any difficult messages. Be accountable.

In summary

A short monthly investor update is one of the most effective ways of keeping investors updated, motivated and engaged.

Early stage investors want to be part of your journey and they should be kept onside. Remember no news is bad news.

By making yourself more accountable you will inspire greater confidence and belief amongst your investors. At some point you will almost certainly need their support.

Great founders are great communicators. A frank and open monthly update shows you are across the issues and are not frightened to ask for help.

Regular updates are a powerful way of warming up new investors that may be keen on investing at the next stage. Remember, funds invest in lines not dots.

About the author: John Hall is CEO and co-founder of Duet Partners. His 30-year tech career began with major US semiconductor and software companies, and was based in Silicon Valley during the '90's. Before Duet he was CEO of a VC-backed consumer electronics company, sold in 2009 following several rounds of capital raising. In the past 10 years since starting Duet he has advised dozens of founders on the startup to scaleup journey and is a retained Board advisor to a number of UK technology companies.

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