Startups, This Is How You Update Investors
AND DO IT
One thing that startup CEOs are great at is raising money from investors. One thing most of them do poorly is keep investors in the loop and up to date.
After the first of the year, I like to check in with startups I am invested in to see what’s going on. This is true even if I have a small investment. I think it’s great business hygiene to do this quarterly with investors.
When you are a fund manager, it’s a bit easier to get insight into the business. When you are an angel investor, it’s extremely difficult to get insight into the business unless you are writing big checks and are influential.
This update doesn’t have to be major and well-written. It should be bullet points. The idea is to keep the investor engaged beyond just “When am I going to see a return”. Investors often have huge networks you can mine to make the business better. But, they need insight as to how to plug the company into it.
A short blurb about growth and growth rate if there is any. If there isn’t, a short blurb about the challenge you face.
Net income or loss, and if you have capital raising plans
Any ideas about potential exits, the timing of them
Any ideas about potential partnerships
Any ideas about where investors can potentially make introductions for you to propel your business forward.
KISS (Keep it simple stupid) system of communication. Direct, brief, and to the point.
For example, one of the companies I am invested in is NuCurrent. They are the leading wireless power company in the world, based in Chicago. They work with huge companies like Hewlett-Packard and plenty of others.
Their CEO Jacob Babcock got back to me and there was an actionable bullet point and I am working on making some introductions for him.
Don’t let money on your capitalization table be “dead money”. Even if those investors aren’t continuing to invest, they can be valuable. The startup CEO works so hard to find, and sell investors on their company, so why waste the effort?
@Jeffrey - Very on point as usual. Its amazing to me how people do not collaborate with their advisors or investors. I once had a conversation with a founder whose business I was looking at for investment. I asked him how often he met with Wozniak, who was pictured and listed on their website as an investor. He said that he only spoke once when he made the investment in a round 1 year before that. I was shocked and asked him why he doesn't get more feedback and support from him and what I got back shocked me. It was obvious that he only looked at him as "Eye Candy" for his website. I followed with a point that someone like Wozniak is not just a provider of cash, but someone who liked what they were doing and would be happy to support the company as any smart investor would... I said, "all you need to do is ask." The entrepreneurs response was... " I don't need his help..." Needless to say, I did not invest. And, the business is nowhere to be found. UNBELIEVABLE!
Great advice for all private companies, whether start ups or not. If the management communicates regularly with their investor base, it can pay dividends for them in multiple ways including leads and help in problem solving. And then when and if the next funding round is necessary, when management comes courting again asking for an additional cash infusion the investors might be inclined to be less cynical in their view regarding whether management regards the as partners in the enterprise or just individuals whose wallets may be able to be pried open when support is needed and the projections for reaching break even cash flow have proven optimistic.