By Fernando Berrocal
As a stakeholder in a fledgling organization, you’ve probably found a good amount of information in articles and blogs regarding how to hack startup success. This information can range from straightforward advice to in-depth detailed business recommendations. However, there is hardly any specific information about how founders can provide quality information to startup investors.
You can pursue “lean startup” experimentation, or experiment with other interesting trends–such methodologies can have incredible yields. Nevertheless, those won’t have value for your investors if they aren’t able to recognize them. Keeping your investors informed, enthusiastic, and interested in your business is one of the simplest and most under-appreciated business skills that a Chief Executive Officer (CEO) can have. Read on for more information on how to implement this technique with your own investors.
The CEO serves as the investor's main interface to the startup business; hence the importance of establishing a functional line of communication between these two entities. The CEO will determine how investors a) see organizational activity, and b) engage with the business. Investors with a track record of successful investments tend to want certain pieces of information from early-stage business owners. The following list covers the basics on how CEOs should keep investors informed about business matters:
- Make an effort to write to your investors consistently–and keep it short.
If your startup is in its early stages of operations, you might write to investors every 1-2 months. Then, if your team is a little farther along in its lifecycle, you might communicate every 2-3 months. You must know that sending out an update is appropriate if your advisory board or board of directors meets regularly. Both you and the board will find that this is preferable to getting a call. You can also send a virtually identical version to your business personnel, mentors, and/or advisers. By pursuing this technique, business phone calls will be up to date and more effective (if you ever do make follow-up calls). Try to keep it at two pages at most. Your investors need to know what is happening–but not all the specific details. Inform in a general matter, and highlight important aspects.
- Employ a template.
The letter often outlines the high and low points since the previous letter, lays out a few short-term objectives, and then assesses the progress (or lack thereof) regarding those main objectives. The simple act of preparing a template forces you to concentrate on the crucial business details–and prevents those crucial pieces of information from being omitted.
- Convey a sense of the strategic issues you are dealing with, and reiterate your current course of action.
Got a few tough choices to make? The speed at which investors react will surprise you. There's a strong chance they've dealt with this previously and can assist you. Note: you might want to be more cautious if it has to do with something personal. This sounds unusual, but frequently your investors are not keeping up with all of your activities, announcements, and pivots as well as they might. As a reminder, always add a one-sentence summary of what you're doing. In the startup environment, this is one of the most difficult responsibilities.
- Be truthful, but don't divulge your secrets (and always ask questions as specifically as possible).
Would you feel safe if your startup competitors–or the public–got the email? With this consideration in mind, try to shorten your missive. If you’re seeking some precise introductions or a certain type of candidate to fill a role on your team, simply ask! Avoid being shy, but don’t assume a proud manner. Just ask. The investor will probably be unable to assist 90% of the time, but when they can, it's a great advantage to have.
- Put all correspondence in a shared folder for archiving.
Your team and your investors will appreciate this measure in the long run. Believe it or not, no one does this–even though it is so easy. Make it simple for your investors by placing everything they require in an easily accessible folder. Each letter should be sent through email with a link to the shared folder containing the complete archive. Have all of your previous correspondence, maybe your most recent pitch deck, financial information to view, etc. present in the folder. You may think about creating two distinct folders: one complete for the inner circle, and one with redactions for the general public.
There are numerous reasons why startups fail, but one of the most frequent is that they run out of money. Knowledgeable investors are a surefire way to avoid this eventuality; and a dependable source of overall assistance for your operation. If you ever need to raise another round, your angel investors are probably the ones who can help create introductions. If they hear from you more frequently than once per year (when you need certain paperwork) it will be simpler for them to cooperate. Keep in mind that this activity benefits both parties! Don’t think of this practice as a time sink, either; you should spend less than two hours each month on this worthwhile procedure. There is a world of benefit for all startup stakeholders to glean when investors are properly involved in the business.
Ready to bring your startup to the next level? Apply to MassLight’s next batch. MassLight supplies capital and a dedicated tech team. We take equity in return. Have questions? Refer to our FAQ page.
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