How to keep Investors for your next round by keeping them informed
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How to keep Investors for your next round by keeping them informed
By Leung Kwok
Keep your investors informed - You’ve won investment from angel investors. What next? Of course, build your business. But what about 12-18 months from now? Where’s your next funding going to come from? Keeping your investors updated is simple, takes 20 minutes a month and the upside is massive:
Your investors are your fans – They will want to spread the word about how great you are with customers, the press, and new investors. Help them by providing them with fresh information.
Follow up funding – Is this your last round? If not, keep the investors ready. Investors don’t invest all their $ at once & always keep some powder dry. Investors need to know when the next round is & existing investors are the easiest to pitch, especially if they already know what you are up to.
You will pivot - A great majority of startups do. Your investors are used to this and will be supportive if they know your history and have the data. Give it to them.
New Investors will talk to your old investors – Do you want a good reference? If existing investors go quiet, what do you think is going to happen?
Copy cats – If your company is any good, you will get copied. Do you want your investors going to them? If they are informed, not likely. Because they will feel you have a lead & they are in your corner.
How Investors think:
If a founder is not sending updates, we investors think the company is going out of business because historically, successful companies send regular updates & failures don't.
Your investors want to help you. It’s in our interest, so let us.
Your investors know a lot. Many have seen thousands of companies and made hundreds of investments so it’s likely they know more than you. Leverage that knowledge.
Your investors have more money than you. Otherwise, you would have funded the company yourself.
Will your investors micro manage you? Most have hundreds of investments… so no
Short updates are okay – actually short is best.
If it’s bad news, knowing early & better than not knowing. You won’t be blamed. Since you kept investors informed it’s more likely they will invest in your next idea.
What to include:
Charts / numbers are best:
Revenue
Unit sales
New & existing customers / users count
Your KPIs (Key performance indicators) especially if it’s not revenue or unit sales
Churn, returns, &/or Net promotor score – this is a product quality metric
Headcount
Runway (critical) Cash in the bank divided by burn. If revenue or expenses are spikey – use last 3 month’s average
Qualitative information:
Next milestone
What did you achieve compared to your last milestone?
Good News / Bad News / Asks;
Asks – Always ask your investors for help. We want to help. For example:
Intros to costumers
Industry expertise if relevant
Hires
Avoid:
Mixing revenue types is a bad idea – e.g., Subscription vs one time.
Pipeline – Include pipeline if you are at least 75% sure you will hit them because we will pull it out & compare them with actuals. If you don’t hit them in a later update, it reduces your credibility. Show your progress.
No cumulative numbers or charts – Experienced investors will think you are “BS-ing” them.
How:
Monthly best
Important numbers on top. Up, down or flat are all okay – you are not the 1st company we are seeing
Use the exact same format each time. Easier for you to do and for Investors to compare
Get in the habit of sharing news regularly with your investors. It will pay off in a major way for you. Informed investors are happy investors, and happy investors write checks. Is may not your last company? Even if you fail, investors will support you again if you treated them well. Again & again. We know the hits may be the 2nd or 3rd company you build, if not this one. So, write your update. Sleep on it. Read it in the morning and send it.