Updating Your Investors

This post is for companies in their first year or so and have angel/seed investors.

You should update your investors. Even if they don’t have a legal right to updates (i.e., “information rights”). It can help you more than it benefits them. I learned this from Ron Conway – updates are a sign of a good entrepreneur. Even and especially if things aren’t going well.

Josh Hannah of Matrix has a good post on why updating investors is a good idea. The points I’d add to Josh’s post:

  • Updating others can foster accountability.
  • Doing them as frequently as possible is only good thing but monthly is fine.
  • Doing them frequently also keeps them shorter. The most painful are the 2 page emails.
  • Use more numbers than words.
  • You can even try to create a template where you just plug in the numbers.
  • Also include a qualitative paragraph but it doesn’t have to be exhaustive.
  • Always include amount of cash you have, net burn, months of runway left.
  • You can even start with (i) requests for investors, and (ii) a leaderboard naming and thanking investors who delivered on last month’s ‘asks’. I’ve seen some founders do the latter and it’s pretty effective. Shame is a great motivator.

Some of the best updates I’ve ever seen were from Eric Wilheim, founder of Instructables. He said it took him about an hour or two each month. In a recent email exchange, he wrote:

…I did have a pretty consistent form that I followed, and plugged in the numbers each month. That was very quick since I already had all of the numbers tracked and recorded elsewhere. The qualitative section discussing my thoughts about how the business was going sometimes took longer. At most it was an hour or two, and I set a calendar reminder for a time of the month when I was sure I’d have all of last month’s numbers readily accessible.

I felt it was important to keep my investors fully updated on these quantitative metrics because they were co-owners of the business with me. I wanted them to already know the health of the business so that when I ran into them at events we could immediately get to discussing higher-level topics. I also found it was good discipline to once a month think critically about where I needed help and directly ask for it from my investors.