Why Investor Updates are Important
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David Waxman
Why Investor Updates are Important
By
David Waxman
Running a startup, you’re almost by definition short on time. You have candidates to interview, product changes to implement, clients to save… with all this and more, putting together a monthly investor update can feel like a chore.
But here’s the thing: Investor updates will pay off massively if you do them well, and not doing them could cost you far more than you think. Admittedly, these days I’m an investor, so I’m a little biased, but for 18 years I was a founder, so I know the cost/benefit relationship first hand.
Your goal here is a well-informed investor. Some investors are incredibly helpful. Others less so, but no investor can help if you’ve haven’t told them what’s going on. Armed with information, an investor can deliver a key intro, an insight, or a candidate. If the investor has a big portfolio, an update can pop your company’s needs to the top of the stack and you might end up with that great engineer who just came onto the market.
There’s also a slightly fuzzier reason to do regular updates: a well-informed investor feels like he or she is on the team. Without that connection they might feel like an outsider, and that’s especially important when things get difficult (which happens a lot in the life of a startup). An investor you’ve kept close is much more likely to be calm and helpful in finding a solution. An investor you’ve left in the cold could easily slide into an adversarial role: Nobody likes bad surprises.
Plus, a successful investor update does not have to be complicated or long. Micah Rosenbloom from Founder Collective put together this helpful template. It’s a great model, and easily tunable to your particular business.
How often should you send an update? For early stage companies I think monthly is right, because things change so quickly. Some founders find this a little too much and put out updates bi-monthly or quarterly. But unless your startup is very stable, anything less than quarterly is insufficient. Whatever frequency you choose, stick with it. A couple of missed updates lead investors to assume something is wrong. And if there is something wrong and you suddenly surface with bad news, your investors will feel they’ve been purposely kept in the dark. At the very moment you need their help, they’ll be mad at you. You’ll need to spend time calming their concerns before getting to solutions, and that’s time you could have saved by communicating earlier. This is what I mean about investor updates giving you a good return on investment. Good communication leads to good relationships, it’s as simple as that.
So write updates. Keep them short, to the point and on a regular schedule. You’ll be surprised how much friendlier your investors can be when you treat them as part of the team.
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