Some investors believe that not receiving a monthly update from a startup is probably a sign that they’re going out of business.
We’re fully aware of it – nobody, nobody likes writing reports. Not even your favourite agent Mulder when reporting on his uber-fun and surreal adventures. But there’s a reason everybody has been putting up with them for so long now, they’re incredibly important for the wellbeing of a company. And let’s be clear about one thing – absolutely everybody gets that super geeky sense of delight after submitting a nice report that the investors loved.
Investment updates not only keep your investors in the loop about your progress, but help you see the macro picture more clearly. Investors, of course, always want to know what’s going on with their investment, but they shouldn’t have to ask. This is where regular (monthly) investment updates come in the game. They keep investors briefed, assists you in maintaining a healthy relationship with them and help in overcoming challenges and problems. On the plus side, it shows that you’re a communicative entrepreneur who respects their contributions.
Investors, of course, always want to know what’s going on with their investment, but they shouldn’t have to ask.
Some might even go so far as to say that compiling regular investment updates is valuable even if you’re bootstrapping and you don’t have investors. They claim it gives you a better look at the big picture, which we all know can be a huge struggle for entrepreneurs nowadays. This just proves our point that learning how to construct the perfect investment update is something you might find really useful for your career as an entrepreneur and for the prosperity of your startup.
In order to make things easier for you, we compiled this step-by-step mini guide on creating the flawless investment update. We accompanied each step with a dazzling slide from SlideCamp, in order to help you focus on your victories without worrying about the visuals.
STEP 1 – INTRODUCTION
Most probably your investors work with other startups beside yours. So the very first, intro slide of your investment update should cover all the most important basics – what the update refers to, who in your company prepared the update, and most essentially, the time frame you’re informing on.
Of course, you shouldn’t follow our tips blindly and you should determine which frequency of updates works best for you. Usually startups send them monthly, but maybe you think that updating your investors once in three months is sufficient.
STEP 2 – CURRENT BURN RATE
Simply put, ‘burn rate’ is the rate at which a company is losing money. It is typically expressed in monthly terms. The word ‘burn’ is used as a synonymous term for negative cash flow. It’s also a measure for how fast a company will use up its shareholder capital.
The simple equation would be:
Money left in back / Monthly burn = Months of runway.
It occasionally refers to total expenses, but more commonly it’s used to refer to cash receipts minus cash expenses when the difference is negative.
STEP 3 – CURRENT TRACTION
The most persuasive evidence you can provide that your business is worth investing in is ‘evidence of demand’. Clearly if this demand is translated into sales, you have irrefutable evidence that the startup has traction. The greater the sales, the greater the proof.
Traction is the proof that somebody wants your product. Ideally, it should communicate momentum in market adoption. Depending on your startup’s phase, this could mean: profitability, revenues, active users, registered users etc.
STEP 4 – CURRENT WEBSITE / APP TRAFFIC
Seams like the buzzword of the year award will go to – SEO. This definitely indicates the importance of web traffic – the ultimate measurement for visibility. When reporting to your investors, never forget to include all relevant data, especially the number of unique users that visited your site or app that month.
You can find out where website traffic is coming from, how many visitors are coming to your website, where they are going, and through which search engines and key words they found your website.
STEP 5 – PRODUCT UPDATES
Brief the investors regularly on all news and changes regarding the product they’re supporting. Include information on everything that you’ve changed in the product itself since the last update you sent. It’s good to provide details on the need of such update, how it works and what it does, and if possible, include screenshots.
Some investors love to click-through wireframes made on tools such as Invision App to see where your product is going to be in the future.
STEP 6 – PRESS UPDATES
If your startup got mentioned in a local or even major press outlet – make sure to boast about it in front of your investors. Press mentions are an indicator of a successful marketing and PR. Logically, this section comes after the product updates one, since usually they would be the reason for the mention.
As much as they appreciate numbers and stats, they appreciate a public recognition of a job well done. You can also include some nice customer feedback here.
STEP 7 – BIG WINS
Actually, all wins, big and small ones. Name all the goals you reached, that you’re part of, it can be anything that you believe is of a great importance for the success of your company. Consider – What did you manage to achieve this month? Why would you say it was a successful month? What made this month so special for your startup?
Think of everything, it can be anything from record website visits and satisfied customer stories to new online marketing strategy your team came up with after participating in that workshop.
STEP 8 – NEW PARTNERSHIPS
Partnerships are an amazing indicator that a business is doing well and propelling in the right direction. Every partnership deal you make is simply priceless, and investors are fully aware of that, that’s exactly why you should always report on every single new partnership.
Most startups fail precisely because they can’t sustain their business growth. In recent years, successful startups have used strategic partnerships.
STEP 9 – NEW HIRES
There is an old management adage that says, “Hire slowly, fire fast.” Well, not any more. It might still work for huge corporations, but the world of startups is a fast spinning one. As an entrepreneur you’re aware that you almost never have the time to sleep on a decision, you have to decide things fast. It’s risky but it’s the way things work. So according to Mark Suster, the startup mantra of today is ‘hire fast, fire fast’.
This means that maybe, even when reporting for a period of one month, it happened that someone joined or left the team. Don’t forget to let the investors know about the team updates, and if you did hire someone, share some more detailed information on the new coworker with them.
STEP 10 – MERGERS & ACQUISITIONS / OTHER VC INTEREST
The same goes here, because the previously mentioned startup world is moving so fast, mergers and acquisitions became something that happens daily – it picked up significantly in the startup space. It’s an unbelievable indicator of a flourishing business, so make sure to let your investor know if anyone has reached out to you.
STEP 11 – QUESTIONS
Probably you’ve been accumulating big questions during the month, waiting for the proper opportunity. This is the perfect moment to do it. Ask your investors about everything you need / expect from them, it can be anything – from an opinion on your idea to hire a new sales VP to asking for advice on your need for rebranding. Dedicate the last part of the investment update for the questions and concerns.
Some investors believe that not receiving a monthly update from a startup probably is a sign that they’re going out of business. So most importantly – brief your investors regularly (preferably once a month), do it in a short and precise way and above all, be perfectly honest about everything.
You have to learn how to accept your failures, they’re as integral part of the path to success (and to the perfect investment update) as are the wins you’re so proud of. So, skip the sugarcoating and start working on that flawless monthly investment update.