As an investor, I’ve noticed that our best-performing companies tend to send investor reports frequently while the ones that are flailing or flatlined never do unless reminded. As an entrepreneur, I know that it can be tough to convey bad news to your investors because you don’t want them to think less of you or be angry or disappointed. Every time I had to write bad news to my investors when I was running LaunchBit, I would cringe a little bit before hitting the send button.
Actually, the opposite is true. I think less of entrepreneurs who never send any information because I think they have no hustle to ask for help when they need it nor are brave enough to own up to the situation. On the other hand, if an entrepreneur rallies everyone together and says, “Hey look, this situation is not going well, can you all help with ABC?”, I really do want to help, and I think highly of an entrepreneur who can bring people together for a tough conversation. Every company goes through tough times. There is always bad news, and you are not alone. If your investors have done multiple startup investments, they should know that very well. One of my investors at LaunchBit once told me that tough situations are actually an opportunity to shine much more than when things are going well. So, not only should you send investor reports to fulfill your fiduciary duty, it’s also a great opportunity to demonstrate what kind of an entrepreneur you are.
Moreover, it’s a way for your investors to get to know you as a person. At the seed level, you often don’t have board meetings, and so you’ll want to get to know your investors personally through other means. A monthly investor report is a great avenue. This makes it easier to ask for help, and investors want to help people they know well. The worst situation to be in is to go MIA for 10 months and then out-of-the-blue ask your investors for a favor. Whether it be intros to downstream investors or intros to other companies for business development or intros to job opportunities… sorry, if an investors doesn’t know you well enough, they aren’t going to be able to refer you or put in a good word.
Investor reports can be quick and simple and should only take at max 10 minutes to write. You should send them at least monthly. The Hustle writes one of the best investor reports I’ve seen and sends them weekly:
Here are 3 things you should make sure to include:
1. KPIs
Every company will have different KPIs they are tracking, but for most companies, this will revolve around revenue. At a minimum, include:
- Last month’s revenue
- OR if you are pure consumer company, DAUs / MAUs
- Growth
Other potential metrics (depending on the nature of your business) may include:
- Monthly leads
- Churn / re-engagements / upsales
Some companies include a graph of their KPIs, which makes it easier to visualize. If you don’t have one or it’s not useful to your company, don’t sweat it. Investor reports do not need to be a chore.
2. How long are you in business?
You should also include your burn rate and runway. Most entrepreneurs don’t realize that investors can potentially help you broker an acquisition or coach you through an acquisition if you can’t raise more money or get to profitability. But, they cannot help if you have too little time left, which is often the case when most startups start to seek acquirers.
Similar to how you should allocate months for fundraising, you’ll need even more time to kick off relationships with would-be acquirers. Sending an email out of the blue telling your investors that you have just 8 weeks of runway left and that you are only now seeking an acquisition is not helpful to anyone, and if you do find one, it will not be material.
3. How can your investors help you?
Put your investors to work. How can they help your business? Do you need specific intros? Do you need them to provide feedback on your deck for your next round? Do you need help filling a specific role? Do you need UX feedback?
You should ALWAYS ALWAYS ALWAYS have a call-to-action in your investor reports. They may not all be able to help, but you should ask.
Investor reports can be used to connect people
As an aside, investor reports are also a way to be a connector. Investors LOVE to network, and so you have the opportunity to connect all your investors with each other. The Hustle, for example, will often host and email its investors about exclusive events. Later, whenever I run into a co-investor, we’ll often exchange a line or two about The Hustle, and everyone will feel good about themselves for being an investor.
I should note that their events are not fancy or costly at all. It’s about the exclusive attendee list, not the actual food or drinks. People can have a really good time with just $2 wine and simple cheese or pizza. Exclusive events are also a good way for investors to bring in their friends, who will in turn also feel like they are part of something exclusive (and may even invest in your company).
Be transparent
Be transparent with your investors about your business. They are already invested, and so you have nothing to hide, even if you have bad news. Sending reports on a monthly basis will make them feel closer to you, and they will be more invested in your personal success.