Best Practices in Communicating With Your Investors
Investors are a great resource. They're helpful for funding and often times helpful in making strategic connections. Keeping them engaged is a net responsibility of the entrepreneur - and letting them become disconnected and uninterested could drastically decrease the likelihood of their participation in subsequent rounds.
Regularly interact with your investors every 2 weeks via email. Your email should be something that investors are looking forward to receiving. You should be honest and candid with what you say, and clear about how their investment is doing. The following format works really well:
Part 1: Major accomplishments or failures
Part 2: Sales
Part 3: Overall finances
Part 4: Asks
Part 5: Staff additions / changes
I've been on both sides of the investor update email. As an entrepreneur, I've always wanted to shield my investors from the craziness of day-to-day life and growth - looking only to share successes. As an investor, I've always been skeptical about glowing reports from my companies, knowing matter-of-factly that there are 10-bumps to every 1-big success. When entrepreneurs follow a formula in their updates, and make those updates with regularity, the bond and legitimacy of the relationship become dependable.
Be careful of the overly formal, positively spun cliché (AKAs):
ENTREPRENEUR SAYS: We're about to switch our revenue model!
INVESTOR HEARS: They're not making money and they don't know what the hell to do
ENTREPRENEUR SAYS: We're working through a ton of deal flow right now and have a bunch of closes on the horizon
INVESTOR HEARS: They're getting conversations, but can't close deals, something is off.
ENTREPRENEUR SAYS: Our sales have doubled since our initial launch, and we're projecting steady growth for the next two weeks
INVESTOR HEARS: No new news, what are they working on?!
ENTREPRENEUR SAYS: We've brought on 3 new developers to help support the launch of our new version
INVESTOR HEARS: They're focusing on product – that’s a $500k spend on dev - are we ready for that?
What are your favorite AKA's? We'd love to hear more about them!
Special thanks to Alec Hartman, CEO of TechDay