From what metrics to include to how transparent you should be, this is the guide you need.
A lot has been said on how important it is for founders to send investor updates. You can read countless articles about what to put in an investor update, but we're going to pull back the curtain and instead focus on how investors use the those updates and what they’re thinking about as they read them from our perspective at Bread and Butter.
Do investors actually read updates?
Absolutely. We read every update from current portfolio companies to help us understand where they are and how we can help.
We also read updates from companies we are keeping an eye on as potential future investments. In this case, the companies are typically too early to fit within an investor's thesis area. Questions we’re looking to have answered from the updates include if the company growing and if contracts mentioned come through.
What metrics should be included in an investor update?
According to the team at Visible (a great tool for sending your investor updates!), investors’ most sought after metrics are revenue, cash, headcount, customers/users, expenses.
If your company is pre-revenue, you can still include useful metrics that indicate how you're progressing such as a product burn-down chart and the number of customer interviews you've done.
Including context for those metrics is just as important as including them in the first place. Let's say you report $10,000 in revenue this month. Without knowing how much revenue you took in last month, an investor has no way of telling if your company is growing, stalling, or maintaining sales. You can provide that context by indicating the month-over-month change, but our favorite way to demonstrate metrics in an update is using a graph to show progression over multiple months.
More than anything, looking at these metrics gives investors a clear view of what's going on in your company. They can help identify which company needs support, which needs to think about raising additional funds, and which has the opportunity to raise funds preemptively.
What do investors think when I don't include metrics?
If you’re already in market and have revenue, not sharing metrics doesn't signal great things to an investor. It causes us to worry. If you're not including metrics because you're embarrassed or are trying to hide something, you're digging yourself into a hole. You're causing your investors to worry (perhaps more than if you had shared your metrics in the first place) and missing out on the opportunity to have your investors help with whatever is going wrong.
Ultimately, you're missing the major point of sending an update when you don't provide metrics. Investors don't want a community newsletter; they want insight into how the company is doing.
How transparent do investors expect me to be in an update?
As transparent as possible. Updates allow you to keep your closest supporters on your journey, good and bad. If your company is struggling because of slow growth, team issues, or other tough situations, being transparent is an opportunity to gain support from your network.
Whatever you're facing—problems strategizing when to take on more capital, changing your sales tactics, or deciding when to cut costs— the more transparent you are, the earlier an investor will be able to help. If we don't know there's a problem, we can't help. Being open and honest about what's happening helps build trust and credibility with your investors. You might leave out confidential information when sending an update to folks outside your current group of investors, but you should still not be afraid to share challenges and asks for help.
What should I ask for in an update?
Always include an ask in your update! For example, you might ask your investors for help with securing additional funding, finding new business opportunities or partnerships, and gaining strategic guidance and mentorship. Startups may also ask their investors for introductions to potential customers or other industry contacts (writing a forwardable email is great for this) and help with recruiting top talent.
When it comes to crafting the ask, the more specific or direct you are the better.
- No: “We’re hoping for introductions to potential clients."
- Yes: "We're looking for introductions to Directors/VP of Marketing at the 100 companies listed in this list."
- Yes: "We're looking for introductions to Jane Doe at Wayne Enterprises and John Doe at Schrute Farms."