All great relationships have one thing in common: communication. Open and honest communication is the key to any fruitful relationship.
So why should your investor relationship be any different? Great entrepreneurs have an open dialogue with their investors and are able to get the most from them.
However, at Visible we constantly hear about companies going silent after the money is wired.
Why? Here is my hypothesis: startups are hard. This isn’t earth shattering news, but when you start to look into the head of an entrepreneur it will make sense why they have communication problems with their investors.
When you are a CEO/founder/entrepreneur, your view of the world is just your company. Your “portfolio” is 1 of 1, so to speak. Updates to your business are typically not amazing. Instead of providing regular updates about the business, a founder will wait until they have amazing news to share. The amazing news never comes, the founder has been silent for 6 months and has 45 days of cash left.
Who is more likely to get the bridge round of financing? The founder who has been providing regular updates and correcting course when needed or the one who has been silent for 6 months and has no cash left…
It’s always scary to share bad or mediocre news but it is what the great founders do. Why? Because they realize that they can extract value from their investors outside of just capital. An investor’s view of the world is one of many. They have seen failure, success and mediocrity. They know when to step in and when to let go.
Great. So how do I communicate with my investors? What do they care about?
Consistency is the key. Typically, the earlier you are in your lifecycle as a company the more frequent the investor update. Companies going through an accelerator may be sharing weekly updates, whereas Seed/Series A are monthly, and Series B+ are quarterly.
Most early stage investors care about a couple key things:
1. Cash in the bank.
Cash is the oxygen of the business. Without it you die. This should be the metric that startups have their eye on. All. The. Time.
2. Months to 0.
This is how many months until you are dead. Typically your cash in the bank / net burn. You can get fancier and include hiring plans, etc but we like to keep it simple.
3. Key Metric Growth.
This is the growth of your “true north” metric. It could be MRR, it could be DAU, but this is the metric on which you define success. Afterall, PG said it best: Startup = Growth.
How is the team performing & who are you hiring. You can get a little more advanced here and report on the team composition, e.g. R&D vs Business vs Admin. You could also split our full time employees, part time, and contractors.
AKA how investors can help. Having explicity actions for you investors is the best way to leverage them. Saying “looking for intros to BD execs at CPG companies” will not get you anywhere. Saying, I need an intro to Mike Smith at Acme Corp will convert much better!
What investors really care about is how you are executing against your plan. Seeing that you have 4,500 MAU is great but how does that compare against the forecast?
Ultimately the format is up to you. We see companies put the “Asks” first alongside “Thanks” for those who helped from the prior update. Some include the new hires first. We have a ton of different templates, examples and resources on our Reading List.
Obviously we are biased, but Visible was built to solve the investor relations problem for startups. We easily allow you track, visualize and forecast your KPIs and provide a narrative to your stakeholders. Feel free to hit us up if you have any questions or sign up!
[author author_image=”http://www.boomtownboulder.com/wp-content/uploads/2015/03/mike_360.png”]Mike is the CEO & Co-founder of Visible.vc. Prior he ran business development for Formspring. He participated in the Orr Fellowship and graduated from Indiana University. You can follow him at @mikepreuss.[/author]