Almost every tech startup that raised funding from venture capital funds periodically sends them an investor update to showcase the latest numbers, trends and just generally keep them aligned with the direction the company took. When I was working at Day One Ventures I’ve seen hundreds of these emails of various quality. Since my primary job right now is helping startups and VC firms communicate better internally and externally I’d love to give my own perspective on writing investor updates that help both you and your investors.

Investor updates allow to build a sense of connection and show your momentum to your current and prospective investors. As a founder you often want your current investors to participate in further funding rounds (right up until the point Andreessen Horowitz steps in and want the entire round for themselves). You also might be talking with some prospective investors who aren’t ready to make the move yet. It’s quite customary to include the warmest of these investors onto your mailing list as well. It’s much easier to make an investment decision based on a few data points you were able to witness yourself and not just placed on a chart.

All the best updates I saw had these things in common:

1. Had a simple format
2. Came on a regular cadence
3. Pushed the ever-changing startup’s narrative
4. Showed both absolute and relative numbers
5. Engaged the investors to keep them closer
6. Gave enough information without being too long

Let’s dig into all of these aspects. Or feel free to jump to an example in the end.

Also, let’s define the applicability before it’s not too late. I’d suppose it might be helpful to very early-stage companies until their Series B tops. Also, some of the most successful investments we made haven’t ever had a regular update. Of course you can live without it, it’s up to you.

Format

An investor update isn’t a board meeting. You don’t need to have a deck nor you want to create a custom complicated formatting for your emails.

Always remember that in the majority of the cases your investors will be reading that on their phone sitting in an Uber. I admit, this particular piece of advice might not be that true in 2020 with the pandemic going on – but it’s generally applicable whenever you do something for busy people to review.

Use a plain text email. You can add a few visuals, like photos or charts, but nothing excessive. If you have a very small & loyal group of investors you might just cc all of them and let them engage in a conversation. Anything more and you can put them in a bcc. It’s primitive but it does the job, and believe me, the investors are much more interested in the numbers and facts than the technical means you used. They certainly don’t want you to spend too much time.

The best option is to use a basic newsletter service that would allow you to track the open rate and put the first name of each investor right in the greeting. Make it personal without making it too complicated.

Cadence

You want to keep investors updated but you don’t want to turn it into a full-time job. Especially at the beginning, that’s not the part that you can simply outsource.

I’ve seen companies sending weekly updates but I doubt it helps except maybe for very early-stage companies with inexperienced founders. Monthly is the best option for most startups probably until around Series A/B. The amount of information that needs to be processed for a proper update rises a lot and your shareholders already believe that the company won’t suddenly die.

It’s okay to be slightly off your scheduled time, especially in the early days, but it might cause you to decide to drop some updates altogether – there are always better things to do, aren’t there? And then it’s just like going to a gym where missing it a few times might lead to you visiting it three times a month.

Everyone knows you’re busy. Find a length/complexity level that works for you and stick with it.

Story

I’ve seen founders put their complete roadmaps in an update, copying their spreadsheets or taking screens from some project management software. Your job isn’t to dump your Asana and JIRA on people. Your job is to process all that information and build a narrative around it, presenting the most important things in the way that helps you.

Investors put money in a startup because of its story. Even if you had crazy charts of WoW growth, everyone understands that it might die out or end up being not enough. You’re selling a vision of some distant future.

Early-stage companies often change their product and their business as they learn more about the market. Use every opportunity to remind investors about your potential and explain each current iteration of your vision that comes around.

Figures & Numbers

One of the most common mistakes I saw was omitting the real numbers behind the business. If you do that you either show that you are hiding them or look unprofessional.

Each company has a set of key numbers that would describe its performance. Some are standard: revenue, burn rate, the number of customers. Some depend on the industry: # of supply providers, cities/states covered, followers, couriers, etc.

Show both the absolute and relative figures, for instance, how much revenue you had this month and how that relates to the previous month. If you have enough data and in a seasonal business it might be more useful to show how it relates to the previous year or your initial plan.

Engage!

Each investor update is an opportunity to talk to your current and prospective investors. First, have a clear ask in the end highlighting the things your investors can help you with. It should only be a few things, don’t lose the focus by listing everything you have issues with.

For example, you can say that you’re looking to hire a full-stack developer with experience building fintech applications and looking for introductions to a specific type of people at US banks.

Create FOMO. Mention and thank the people who helped you earlier. By doing that you’re creating an incentive for others to materially help you. All of us are vain..

Structure & Length

Here’s the structure I’d suggest you follow.

1. Greet the investor(s)
2. Remind what you’re building
3. Tell about the most notable things that happened since the last update
4. Have a short list of bullet points with the most important numbers about your business
5. Thank people who helped you the most by their names
6. Ask to help you with one or two things where your networked investors might be useful

It’s natural to feel the need to hide the bad things that happened – or good things that didn’t. Don’t do that, it’s quite easy to grasp after a few emails from you. People understand how startups work and that there will be setbacks. That’s where your input is required. Build a narrative around that. Write about that with high energy, explain what your hypothesis was, what really happened, and what you’re going to do. The best investor updates I’ve seen didn’t shy away from problems.

Example

I’d love to share a few real examples of great investor updates but I understand why the founders I talked to weren’t particularly happy about that. Unfortunately, that leads to a clear lack of good templates online. It’s easier to find examples of great startup decks.

As an alternative, I drafted this update for an imaginary company utilizing the best practices I saw.

Hi Marc,

Wanted to share an update for September. It was a roller coaster of a month!

Over the past three years we’ve built Redd into the most powerful personalization engine for news content. We now have over 25,000 paid subscribers, double of what we had just 6 months ago!

Redd’s mission is to build the only news digest people would have to read. We help busy professionals stay on top of their field without consuming too much of their time – as if a dedicated analyst was crawling the Internet for them. Right now our PMF score is at 36% and we hope to drastically increase it with the new features we’ve been brewing.

Stats

• MRR: $126k (+9% MoM)
• Paid Subscribers: 51,203 (+11% MoM)
• Burn: $174k (+14% MoM)
• Headcount: 16 (+2)
• Runway: 11 months

Highlights

• We’re about to launch our B2B offering for employees at large organizations and expect it to significantly increase the number of subscribers and diversify our acquisition channels.
• We’ve revamped large parts of the recommendation engine under the hood and seeing higher satisfaction from its results.
• The referral program we launched four months ago is now bringing at least 40% of new sign-ups.

Setbacks

• We’re still seeing lower quality of subscribers from our paid acquisition efforts and we believe that in order to scale faster we’d have to crack this.
• We’ve spent a bit too much time on the idea of running multiple focused digests and will be focusing on one per day with separate topics-related sections.

Special thanks to Phil Dunphy, who helped us hire two amazing designers, and Gloria Delgado for all the enterprise sales advice she gave us.

Asks

• We’re still looking for data scientists with experience in recommendation engines. Feel free to share our job description with relevant people.
• We’d love to talk to editors at major news organizations to learn more on how they build their main page.