Since 2012, I’ve made 57 angel investments, invested in a further 25 ventures as a limited/general partner, earned “sweat equity” in 5 companies as an advisor, and launched 4 different businesses of my own. Here's what I've learned about investor updates.
Note: you can find our investor update template here.
Just do it.
By far the most important feature of any startups investor updates is actually doing them in the first place. I've backed dozens of founders, and while most send relatively frequent updates, it is far from guaranteed.
Of the 57 direct deals I've done, I can't think of a single company that has sent a regular update without missing one.
Anecdotally, I would estimate that 0% have sent an update every quarter; maybe 25% have sent an update most quarters; a further 25% have sent updates sporadically; while a whopping 25% have almost never sent an update. Shocking! It's really not that hard. I send one myself, every quarter, without fail. If you want to stand out, I recommend you do the same.
Not too often, mind.
One of my portfolio companies sends a monthly update. I don't mind that, to be honest. They're very early and still searching for product-market fit, so it's quite nice to be following their trials and tribulations, and it gives me a chance to help, or make introductions. By and large, though, I would recommend sending updates quarterly.
Startup investors are patient beings. After all, unless they're a novice, they've invested in you with the expectation that they will receive nothing back for a decade. They can probably last 12 weeks between updates.
Investors want their founders and teams to focus on delivering, not informing them about every little twist and turn. In all likelihood, they know that things are not going to plan. They backed you, not because you have the answers, but because they believe you'll make it through the maze.
Not too short.
It's true that something is better than nothing, but don't just send a few lines to say hello. Many angels and certainly VCs consider themselves professional investors. They may have partners (including spouses!), employees, and their own investors, all of whom may be expecting updates too. Your updates are an opportunity for your investors to temperature-check your business, and therefore their investment portfolio as a whole. When you write your updates, keep them straightforward, factual, and (hopefully it goes without saying) honest.
Not too long.
This may surprise you, but long updates are almost as bad as short ones. Several of my portfolio companies send extremely long, detailed reports. Not only do a groan at the thought of spending 30 minutes working through these updates, I'm also fully aware of how long this update must have taken to write. That's time the founder should have spent building the business, not reporting on it. Keep it succinct.
Facts and figures.
Some of the updates I receive are a total waste of time. Not worth reading. If your updates are nothing but a selection of news stories and highlights, trust me, you may as well not send anything. Sure, investors are happy to hear your triumphs, but only if they relate to the underlying business story. Investors need facts and figures.
Revenue, run rate, profit, burn, runway.
If we wanted to read a story, we'd go to Amazon. Updates should be focused on the business fundamentals: income, costs, profit-and-loss, growth (i.e. revenue), other forms of progress (e.g. intellectual property), and cash position. Investors use founder updates as a gauge for how your business is performing:
- Will you succeed or fail?
- How good or bad will it be?
- What form will it take (sale, IPO, merger, liquidation)?
- When will it happen?
- What, if anything, can they do about it.
It's that simple.
– Title photo by Jayne Harris.