What is an Investor Update?
Importance of Investor Update
An investor update is very important for the following reasons;
- Encourages accountability and transparency. Giving investors updates keeps founders focused and more diligent in dealing with investors. These attributes make it easier to have meaningful progress to share about the startup. It also helps founders stay at the top of their game.
- Investor updates make it easier for startups to raise the next round when needed. Investors are more likely to spend more on a business when they engage in the company through regular investor updates.
- Investor updates keep investors engaged in the startup. This is because the update allows founders to seek the opinion of their investors when faced with challenges. The investors are able to offer advice were available and also become conversant with the happenings within the startups.
- Additionally, the update helps startups keep a healthy relationship with their investors.
Timeline to Update
There is no rigid rule on how often you keep investors updated about the growth of your startup. The frequency depends on the nature of your business, your management style, and the expectations of your investors. However, the key to investor updates is consistency.
While some investors want weekly updates, others desire monthly or quarterly updates about the company. Consequently, investor updates could be daily, weekly, monthly, or quarterly, depending on your investor’s needs and the stage of your company. New startups tend to send monthly updates, while later-stage companies send quarterly updates. Irrespective of the timeline, founders and investors need to agree to the update schedule and stick to it.
Who Should Receive an Investor Update?
Usually, all investors in a startup company should get an investor update. Sending your investors a regular update is a powerful tool for staying in touch and passively letting them know you are working hard and taking care of their investment. However, aside from the investors, other important stakeholders should never be overlooked. These stakeholders include;
- Potential investors
- Mentors
- Advisors
Tips to Create the Perfect Investor Update
- Consistency. Founders should have a schedule for sending investor updates. This is because sending updates to investors at regular intervals is an important way to build trust and confidence in your business.
- Focus on key metrics. The metric could be daily active users, monthly recurring revenue, or time spent on a product. Whichever metric your investor update focuses on, ensure to make it consistent to avoid portraying your business as lacking focus.
- The update should have a consistent format that is not only easy to understand but also easy to scan by including key information in headlines. Having a consistent format makes it easy for investors to compare current updates with previous updates to easily determine the progress of the company.
Essentials of an Investor Update
Understanding how to write a powerful investor update is a way of having a lasting relationship with investors. While writing an investor update, founders should keep in mind that the update must be simple, clear, and straightforward.
- Product launches: A good investor update should include new products and services launched by the company since the last update.
- Key Hires: It is usual for startups to recruit new employees as the business grows. Hence, an investor update should include any new hires made, their skills and expertise, and the return expected.
- Milestones achieved: Ideally, new businesses have milestones laid out in their pitch deck during fundraising. These include wins with customers, sales goals reached, current revenue, etc. The investor update should include milestones that have been achieved at the time of writing the update.
- Pending milestones: Investor updates should also include the next milestones and set goals. This will help investors to have an easy benchmark for the next thing the startup is headed to.
- Challenges: There is no doubt that every company has its challenges. Hence, while writing your investor update, it is important to identify and include challenges the company is currently facing and ask for help from your investors. This is because investors may have the resources to help the company tackle its challenges.
- Financial statements: Inform your investors of how much you still have left, your burn rate, and when next you will be needing to raise more money. Also include the estimated time when you will start making a profit. The importance of including this is to keep your investors motivated to pitch in and have you in mind when your next round of fundraising comes.
The importance of investor updates cannot be overemphasized as it is a win-win strategy for all parties. Apart from keeping investors in the loop, it also forces you as a founder to reflect on your accomplishments and progress. Growing a business can be a struggle and this makes it increasingly difficult to see the milestones you and your team have crossed. Founders can see the bigger picture and how much progress the company has made.