Every three months, I send an email to Groove’s small group of angel investors with an update on our progress. Here’s a behind-the-scenes look at how it helps us grow…
“We ran into a tiny technical issue last week.”
Bullshit. It was NOT tiny. Not even a little.
“A small outage brought us down for a bit.”
Dude. Get real.
I must’ve written, deleted and rewritten the sentence a half dozen times before I got the truth out: the server outage (the same one from this post) was disastrous.
I was writing my quarterly investor update, and I had to tell them the truth — the whole truth — about what happened.
But that didn’t make it feel any less shitty.
These people believed in Groove enough to put their own money behind our dream, and every time I share a fail with them, I’m paralyzed by my fear of letting them down.
Of course, sharing the wins feels amazing.
Over time, I’ve developed a system for sending investor updates that keeps them in the loop about Groove, maintains our strong relationships and helps us work through business challenges.
In fact, I’ve gotten so much from simply writing investor updates that I’d force myself to do them even if I didn’t have investors.
More on that below…
Four Reasons Why Frequent Investor Updates Are Important
Why is regular investor communication such an important entrepreneurial habit? There are four big reasons, one of which has nothing to do with investors:
- The obvious one: it keeps investors in the loop. They want to know what’s going on with their investment, and they shouldn’t have to ask.
- It keeps your startup top of mind. That means that if you have problems that you’re asking for advice on, they’ll be thinking about those problems. And if you have (hiring/funding/networking) needs that you’ve asked them to help you with, they’ll be reminded to do that, too.
- It shows that you’re a communicative entrepreneur who respects their contributions to your business. Not only is that simply the right way to treat people, but it can be useful if you need to ask them for funding later, either for your current business or the next one.
- For me, I find that writing these every three months creates valuable mileposts in the way I think about Groove. I reflect on our growth, think about our strategy and evaluate the business at the 50,000-foot level. When we’re in the trenches, that macro perspective often escapes us, and if I didn’t force myself to sit down and create these updates, I might not be so diligent about stepping back and evaluating our growth this way.
Takeaway: Writing regular investor updates is critical for keeping up your investor relationships, but it’s valuable even if you don’t have investors. It’ll give you a birds-eye look at your business that many startup entrepreneurs I know struggle to get.
How I Write Investor Updates
Here’s an example of an update I sent earlier this year:
Frankly, I don’t know if my approach is the best one out there, but it works for me. The feedback I get from our investors is overwhelmingly positive and grateful for the over-communication.
There are four elements to the email above that I’d consider critical to any good investor update. And while I don’t organize my updates in sections this way, it’s how I think these updates through in my head:
1) Respect Their Time.
Much like with landing page design, you’ll have readers who want the full story, and skimmers who just want the top-level details.
For that reason, I always lead with the big picture, and then break up the update with bold headlines, lots of whitespace and clear, direct language. It’s also worth noting that I use the same exact order for the categories each time, so that those who only want to see a specific section will know exactly where to scroll.
If I’m making a particularly important or urgent ask, I’ll make sure to bold and emphasize it so that it can’t be missed.
2) DDPN: Done, Doing, Planned & Numbers.
This is the core of every update I send:
- What we’ve done since the last time investors heard from us.
- What we’re doing right now to grow the business.
- What we’ve got planned for the near-term.
- And of course, the numbers: number of customers, churn, monthly recurring revenue, monthly burn and cash on hand.
3) Other Wins, Fails and Needs.
Anything that doesn’t fall under DDPN goes here:
- Wins that wouldn’t be covered under stuff we’ve done, including great PR hits and growth milestones.
- Important fails like downtime, major lost accounts or anything else that might impact the health of the company.
- Needs that stand in the way of achieving bigger, faster growth. This might include hires you need to make, partnerships you’d like to explore or any other big strategic challenges you might be facing. This leads to…
4) The Ask.
Hopefully, your investors bring more than money to the table.
If they’re passionate about helping your business grow, then they’re probably happy to tap into their networks to help you solve your challenges. I almost always ask for something at the end of each email. It might be something small like an introduction, but it always helps us move toward our goals.
5) Above All, Be Totally, Uncompromisingly Honest. No B.S.
I’ll admit, it can be really tempting, especially early on, to sugarcoat your company’s struggles.
I still have to work to overcome that temptation, like in the story at the beginning of this post.
But every time, I remind myself that there are two huge problems with that:
First, any good investor will have been through the gauntlet, and will know how businesses grow from nothing. There are a ton of challenges, and for a while you may have more fails than wins to report. If you lie and pretend that everything is always sunshine and roses, your investors will either know you’re lying, or they’ll think you’re delusional; neither is good.
Second, sugarcoating the bad stuff undermines the value that your investors can bring to the table. If they’ve been around the block before, chances are they might have some solid advice for working through whatever it is you’re facing now. Sure, you don’t have to take their advice, but skipping over your struggles means that you’ll never have the chance to consider their advice in the first place.
How to Apply This to Your Business (Even if You Don’t Have Investors)
First of all, if your investors haven’t heard from you in a while, use the template above to get them back into the loop. They’ll appreciate your update, and it just could get you the advice — or favor — you need to break through whatever challenge you’re struggling with right now.
If you don’t have investors, I still recommend going through the exercise of writing a hypothetical investor update at least every three months.
As an entrepreneur, I get lost in the day-to-day hustle all the time, and I’ve found these updates to be immensely valuable for seeing the big picture of how your business is really doing.
Whether you have investors or not, my hope is that by sharing my approach to investor updates, I can help you evaluate your own business on a month-to-month level, no matter what stage you’re in.