Are you a startup founder who has succeeded at raising venture capital funds? You have already wowed investors and secured funding for your business development which is one of the biggest challenges in a company's lifecycle. But did you know that managing a relationship with investors is also a crucial part of running your business successfully?
Unfortunately, most entrepreneurs fail at this point, underrating the importance of keeping investors informed as the company grows. Step into the shoes of your investors for a moment. They have deployed a significant amount of capital in a promising venture, where their success is attached to your company's success.
Therefore, regularly updating them is key to nurturing your investor's network and building trust and confidence. That way, you can also increase your chances of getting them on board on your next round, or perhaps they can refer you to other potential investors.
But with that said, another challenge arises. What should an investor's update include that helps them understand what's going on behind the scenes?
What’s An Investor Update?
Before digging into the tips and tricks to write a compelling investor's update, let's see what it is all about and why they are a key strategy for your business development. Simply put, an investor's update is an important document, usually an email, with updates about your startup performance and how money is being spent.
That said, it's important to mention that the frequency preferences may vary from one investor to another. While some prefer daily or weekly updates, others may want one once every quarter. This is why it's so important to have effective communication with investors, so you can define a schedule and stick to it.
Why Investor Updates Are Important
VC firms usually have a wide array of companies within their portfolios. It can be pretty cumbersome for them to know precisely at what point every venture they have poured capital into is. So keeping them informed with regular updates is a great way to keep them engaged and maybe get them back on your next round.
The goal is to build a solid relationship that goes beyond just asking for funds. It's also to strengthen your network and gain trust in your company. This is not only motivating but also a strategy to show you and your team are accountable and transparent.
What's more, numbers don't have to be impressive to keep them engaged. In the end, it is all about trust and building a sense of connection. Therefore, investors will be able to support your startup not only during good times but also during stormy periods.
How To Write An Investor Update
You now know the importance of an investor's update for your business growth. So, how can you get the most out of this strategy? Here are some key aspects to consider when writing your next update avoiding the most common mistakes and highlighting what really matters to them. Remember that consistency and being brief is key to gaining their attention.
#Summarize. Provide a quick summary of the last period since the previous update, including milestones, sales goals you have reached, and any new hires. Show them where you are on your vision and mission journey and don't skip the goals you haven't achieved yet with a brief description of why you haven't accomplished them yet.
Facts and figures. Truth is, numbers may not be as impressive as you expect. And this is why so many founders choose to omit this information to investors, without knowing they are making a significant mistake. By not displaying the truth behind the scenes, you may be showing a lack of transparency or, worse, looking unprofessional.
Share your challenges. Bumps on the road are part of any startup journey. Unfortunately, nobody has everything figured out. Keep investors updated with your next goals and pending milestones. That way, you prove your business accountability and project trustworthiness by being honest about your wins and losses. What's more, investors may give you the resources to help your company overcome these challenges.
Talk about any changes in plans. Yes, pivoting can be a smart move when scaling up a startup. Whether you are planning on expanding operations locally or abroad, this means a substantial change in the initial plans when you pitch to those investors. Therefore, they should be informed about this new direction which also shows your business is constantly evolving.
The format. This is the most essential aspect for ease of readability. Keep a consistent format, greet investors, be concise and create bullet points with the above mentioned items. Also, include potential opportunities, and what's more important, don't forget to thank them for their trust in your venture. Remember, it's all about building a powerful relationship that can leverage your investor's network for future funding rounds.
The Bottom Line
Sharing updates with your investors will help you and your business seem more professional and accountable. Moreover, it's a great way to nurture your investor's network for future funding rounds. As your startup grows, decisions are made, and plans may change. Keeping VCs informed is key to showing you're still committed to your vision and mission despite the challenges.
And that's why at Base Miami, we work side by side with founders in the complex entrepreneurship journey. Through our wide array of initiatives and programs, we provide them the tools for a successful scaling-up process in the US market. Drop us a line and learn more about scaling up your business abroad.
