How to Write the Perfect Investor Update
In this guide we share best tips for using investor updates to leverage your investors' network, experience, resources, and capital.
The day-to-day life of a startup founder is tough. Between building a great product, distributing your product, keeping employees happy, etc (the list goes on and one) it can be difficult to make time for investor relationships.
However, when managed correctly those outside investors can often be a valuable resource for founders and startups. Investors provide more than capital. They offer advice, expertise, introductions, and more. It is your duty as a founder to let your investors know what is happening with your business so they can help.
Step into the shoes of your investors and it will help understand the importance of investor updates. Put simply, an investor (venture capitalists) job is to deploy limited partners’ capital by investing in startups, generate excess returns, and pay back their limited partners with the hopes of doing it again. This means that an investors’ success hinges on the success of their portfolio company. Put simply, your investors need you to succeed.
Your investors likely have other investments and can’t be expected to know exactly where to help each company. In a crowded space building strong relationships centered on trust and transparency is an easy way to stand out amongst other startups. By sending regular investor updates you can stay top of mind for your investors and tap into their knowledge, resources, and capital to continue to grow your business.
Below you will find our guide to help you write the perfect investor update by understanding what metrics and data to share, properly asking for help, sharing big wins and losses, and raising additional capital.
Why Send Investor Updates
As we alluded to earlier in our guide there are countless reasons to send investor updates. It is called investor “relations” for a reason. You need to build relationships so you can build trust, transparency, and a long lasting partnership with your investors. Investor Updates should only take a few minutes a month and can have an everlasting impact on your business and future endeavors. Not convinced? Check out why you should send investor updates below:
Communication is key — We believe that regular communication with investors and important stakeholders is key to a startup’s success. If your investors don’t know what’s going on in your business, they don’t know how to help. Building a reporting cadence with your investors is a great way to promote transparency and build a relationship focused on trust.
Follow on Funding — One of the biggest reasons to report to your investors is the increased likelihood of follow on funding. In our own reserach, we have found that companies that regularly communicate with their investors are twice as likely to raise follow on funding. As Jason Calacanis, famed angel investor, puts it;
“There is another really awesome reason to keep investors updated: they didn’t give you all of their money — they have more! They want to give you more! If you keep your investors engaged with honest updates they will reward you by participating in future rounds.”
Network — Generally speaking, investors network often and have likely have experience as an operator and investor. Tapping into their network can be an easy way to find introductions to investors, partners, potential hires, and mentors. Getting an investor to go to bat for you will likely carry a bit more weight. As Tomasz Tunguz, VC at Redpoint Ventures, states;
“Investors network frequently, work together and have long term relationships with each other so a referral should go a long way.”
Hiring — In hand with tapping into their network investors are a great resource when it comes to hiring top talent. Between their other portfolio companies and previous experience most investors likely know a number of solid candidates to fill a role. If they don’t have someone in mind for the job, they can at least help talk you through different candidates you are weighing for an open position.
Experience & Knowledge — Between their own experience and other portfolio companies, investors have seen just about anything. If you have an operational or tactical question investors are a great resource and can lend experience and knowledge.
Investor Update Templates
Below we have laid out a collection of our favorite investor update email templates. You can add any of the templates into your Visible account in a single click. Later in the guide we offer best practices and tips for writing specific sections on an investor update.
Techstars Minimum Viable Update — In the “Minimum Viable Investor Update”, Jens Lapinski, Former Managing Director of Techstars METRO, lays out 3 items that he finds most useful in his portfolio company updates.
Founder Collective “Fill-in-the-Blank” Investor Update — An investor Update template for busy founders put together by the team at Founder Collective. Simply fill out the bolded sections and have your investor Updates out the door in no time.
Jason Calacanis Update Template — A 10 part monthly Investor template put together by famous angel investor, Jason Calacanis.
Kima Ventures Update Template — An Update template put together by Jean and the team at Kima. Quickly fill in the quantitative and qualitative data Kima finds most useful.
GitLab Investor Update Template — A 6 part template put together by the team at GitLab. Built for investors to quickly read and locate the information that is most relevant to them.
Y Combinator Investor Update Template — An investor update template from Aaron Harris of Y Combinator. Aaron recommends highlighting repeatable KPIs and major asks for your investors.
Shoelace: Investor Update Email — A template based off of Reza Khadjavi’s, Founder & CEO of Shoelace, investor update email used to wow investors.
The Visible “Standard” Investor Update Template — Our Standard Monthly Investor Update template put together from best practices and tips from Visible users.
Sharing Metrics & Data
Determining what metrics and data to share with your investors can be tricky. There are a slew of different metrics and different investors may have their eye on different things. Changing metric names or what you are reporting can be an easy way to break trust with investors. At the end of the day, it is most important that you share the same metrics from month to month. And as we’ve discussed before, it is okay to share bad months! Every company has missed the mark and any investor is aware that this happens. Building a company is hard!
With that being said, we do have a few areas where investors would expect some data:
Revenue — Being able to generate revenue is essential to a business. However you determine to measure revenue should be kept consistent from month to month. For example, don’t share bookings one month and revenue the next.
Cash & Burn — Cash is king. Cash is the lifeblood of your business and investors expect some insight into how their capital is being managed and used. This is also a great way for you as a founder to stay accountable and on top of your spending as you continue to grow your business.
Margins — Generating solid margins is a must for any successful business. With the exception of the “gig economy,” Frank Mastronuzzi of Greenough Consulting Group suggest that every business should have at least a 55% margin. While likely more important during a fundraise, sharing your margins will help investors evaluate your COGS and acquisition costs.
Sharing Wins & Losses
One of the most exciting aspects of being a founder is sharing and celebrating your victories. As we all know, with every victory comes plenty of losses. Investors are keyed in on your success so it is important to stress both wins and losses equally.
Sharing Wins/Highlights with Investors
Sharing a company accomplishment is generally pretty straight forward. Share why and how you accomplished your goal and carry on. Investors generally won’t be able to move the needle for your wins but is best to keep them informed so they can signal to their network of your successes. Most important is to call out individual contributors when it comes to sharing major accomplishments. All employees like to be recognized for their contributions and there is no greater place to do so then in front of your outside stakeholders.
Along the lines of sharing individual kudos, it is also a great time to highlight new hires. A shout out to new hires will make offer them a warm welcome and the chance to open up to investors.
Sharing Losses/Lowlights with Investors
The most dreaded and arguably the most important aspect of an investor update; sharing losses. Startups are hard and everyone involved with the process knows this. It is vital that you key your investors into any troubles you are facing and why you are facing them. We find it best to lay out the lowlight and offer a solution to improve this moving forward (If you do not have a solution read on to the “Asking for Help” section below).
Generally speaking, nothing is ever as good or as bad as it seems. Sharing bad news is an easy way to strengthen your relationship with investors and they know you’ll be open and honest with them moving forward. Most importantly, this gives your investors an opportunity to step in and help to keep you moving in the right direction.
Asking Investors for Help
Last but certainly not least is asking your investors for help. While every section mentioned above lends itself to asking questions, it is most important to lay out actionable questions where you believe your investors can help.
By laying out a pointed list of areas you could use help, you can easily tap into your investors’ network, resources, experiences, and capital. A couple of key areas we see founders have the most success:
Asking for help closing deals — From our article, “You Should be Asking Your Investors for Help. Here’s How.”
“At its core, building a VC-backed business is about generating revenue. The biggest value add for a business? Closing more deals. Your investors are in the “deal-making” business and likely have a knack for closing deals.
Use your investors professional networks to make an intro, set a meeting, or bring in the necessary backup to close a large deal. If you see your investor has a specific connection you’re looking for, don’t beat around the bush. Ask the investor for the exact intro you’re looking for and tell them how they can be of most value.”
Help with Hiring — Talent is the resource every company is in competition for on a daily basis. Any tool or resource you can use to find top talent for your business is worth leveraging. Investors are generally happen to help fill an open role and often have an extensive network to do so. Be specific as possible about the role, as well as items like the experience level required, and target compensation to make it low-maintenance for your investors.
Fundraising — One of the main reasons to send investor updates is the increased likelihood of raising follow on funding. We have found that companies that regularly send investor updates double their chances of raising follow on funding. When it comes down to it and an investor has to make a decision between 2 investments; 1 that has been communicating and 1 that has not been communicating. It is easy to go with the one that has been transparent and has made an effort to build a relationship.
Even if your investors are not interested in committing follow-on capital, they may be able to introduce you to other investors they know. Investors know other investors. Venture capital is a tight knit community and one positive recommendation can make waves.
Don’t be afraid to rank your investors.
Just as investors are comparing you to their other investments don’t be afraid to rank your investors relative to their peers. As Brock Benefiel, business author, writes,
“Ranking investors can be an intimidating idea, but when done right can provide a useful way for founders to spur increased engagement from their investors and better illustrate their additional needs from the board. To handle it in the most tactful manner, focus less on creating a zero-sum, Game of Thrones-style battle between investors for the top spot and instead provide up-to-date developments on how investors have made a specific impact on the business.“