How Do I Update Investors in My Startup?

As a startup founder, it’s important to keep your investors informed in order to maintain their trust and engagement. But what makes an effective investor update, and how often should you send them?

Regular updates are critical for building trust and transparency, increasing investor engagement, facilitating future funding, attracting new investors and obtaining strategic guidance. The article outlines why these updates matter and the key elements that should be included. Additionally, the article provides several templates from well-known organizations to guide startups in crafting their own investor updates.

Why Monthly Investor Updates Matter

A startup investor update is a structured report that a company provides to its investors on a monthly basis. The report keeps investors informed about the company’s progress, including its financial health, business development, team expansions, customer wins and future strategies. Depending on the agreement between the company and its investors, updates are typically sent on a monthly, quarterly or semi-annual basis. However, monthly seems to be the most common frequency.

Investor updates are critical for several reasons:

• Build Trust and Transparency. Regular investor updates build trust by demonstrating openness and accountability. By providing a candid look into the company, including challenges and victories, the company establishes a relationship built on trust, which can lead to long-term loyalty and increased confidence in its ability to execute.
• Increase Investor Engagement. Providing regular updates keeps investors engaged and informed about the company’s progress. An engaged investor is more likely to provide assistance, whether it’s financial support, strategic advice, or connections to potential partners or clients.
• Facilitate Future Funding. Investors who receive regular updates and are satisfied with the company’s performance are more likely to contribute to future funding rounds. If an investor is kept in the loop and feels positive about the company’s trajectory, they’re more likely to reinvest when the opportunity arises.
• Attract New Investors. Regular updates can help attract new investors. Current investors, satisfied with the progress and the level of communication, can refer the startup to other potential investors within their networks.
• Strategic Guidance. Keeping investors informed about the company’s financials, key hires, and customer wins not only builds trust but also allows investors to provide timely advice and guidance. Informed investors, who fully understand the business, can offer valuable insights and solutions to the company’s challenges.

Investor updates are not just routine reports; they’re a strategic tool to maintain and cultivate relationships with those who have a vested interest in the company’s success. These updates are an underrated but crucial way of maintaining investor relations and fostering trust, all while propelling your company forward.

Key Elements of a Startup Investor Update

You’ll see some great templates below. And while templates for investor updates can vary, there are foundational elements that consistently underscore strong and effective communication. Despite the variability in layout or style, three central tenets emerge, shaping a powerful narrative and promoting transparent, productive conversations with your investors.

• Providing a Performance Snapshot. This overview includes crucial metrics and financial figures that show the company’s health and growth. Investors need to see the investment’s performance quickly, so your update should summarize the most important information into an easy-to-understand summary.
• Honest Disclosure of Highs and Lows. The path of a startup is not always easy; there are ups and downs. While it’s important to share successes to show progress, being truthful about challenges and struggles is even more important. An open and candid account not only builds trust but also invites feedback and potential solutions from investors.
• Specific Requests for Assistance. Your investors and board members are valuable resources, with knowledge, experience and extensive networks. To make the most of their help, be precise and specific when requesting assistance. Whether you need an introduction to industry influencers, guidance on overcoming specific challenges or strategic planning assistance, detailed requests will enable them to provide relevant and effective support.

Below are three templates we think are pretty solid.

Techstars Minimum Viable Update

Hi Investors,

Last month we burned through [$X]. We are on track to turn cash flow positive before [Date]. We will decide over the next [X] months whether we need a little bit of extra cash for working capital purposes or not.

Key Metrics:

• Financial Overview. A chart of net income, expenses and gross profit for the trailing 12 months
• Cash on Hand + Runway. a chart of cash in the bank, as well as the number of months that cash can keep the business alive for the trailing 12 months
• There were no key changes last month. We are interviewing for [Position(s)]and should have offer(s) out by [Date].

Key Problems:

1. We have some problems with [Product Initiative]. We are lacking experience in [X]. Can you recommend a [Mentor/Partner/etc.] to come in and help (this can be a paid coaching position)?
2. I have been approached by a VC who wants to potentially preempt a [Series X]. How do I best deal with this?
3. We have lost two important [customers/potential customers] due to [X]. Can any of you spare some time to talk through our positioning statements and sales process?
4. I am worried that [key competitor X] has just closed a [$X Round]. (See here for more info.) How shall we best deal with this (if at all)?

Many thanks,

[CEO]

Y Combinator’s Investor Update Template

Hey all,

It’s been an awesome but intense [summer/fall/winter/spring]. Many things are tracking well, but there are some challenges we could use your help with (more below). As always, I’ve included charts for our revenue growth, cash on hand and burn rate.

KPIs

Use charts to display your growth over the last six months in the following:

• Revenue Growth
• Cash on Hand
• Net Income

How You Can Help

• We have some problems with [Product Initiative]. We are lacking experience in [X].Can you recommend a [Mentor/Partner/etc.] to come in and help (this can be a paid coaching position)?
• I have been approached by a VC who wants to potentially preempt a [Series X]. How do I best deal with this?
• We have lost two important [customers/potential customers]due to [X]. Can any of you spare some time to talk through our positioning statements and sales process?
• I am worried that [key competitor X]has just closed a [$X Round] (see here for more info). How shall we best deal with this (if at all)?

Quick Recap

Share a quick qualitative recap of how your month went. Be as quick and to the point as possible here. The point is to have your investors read the entire update and offer help.

GitLab Investor Update Template

Hello [First_Name] –

[Quick Intro]

Thanks

[Kind note goes here!]

Introductions

• [Company 1]– [Name, Title, LinkedIn profile]
• [Company 2]– [Name, Title, LinkedIn profile]
• [Company 3]– [Name, Title, LinkedIn profile]

Please send intros to [email@email.com] and view a sample introduction email at link.

Key Metrics

Use charts to display your growth over the last 12 months in the following:

• True North KPI. This is the KPI they feel will have the most impact on success.
• Revenue Actual v. Projected.

Cash on Hand

$942,594

Lowlights

[Lowlight 1]

[Lowlight 2]

[Lowlight 3]

Highlights

[Highlight 1]

[Highlight 2]

[Highlight 3]

Next Month Expectations

[Expectation 1]

[Expectation 2]

[Expectation 3]

Any questions or concerns? No longer want this email? Please let me know.

Thanks,

[Your Name]

Conclusion

As you can see, there’s a slight variation in each template, but the main ideas are present in each one:

1. Give investors a snapshot of the performance.
2. Be honest about the highs and lows of the company.
3. Be specific when you ask for help.

Providing regular investor updates is critical for building trust and transparency, increasing investor engagement, facilitating future funding, attracting new investors, and obtaining strategic guidance. While templates for investor updates can vary, there are foundational elements that consistently underscore strong and effective communication, including providing a performance snapshot, honest disclosure of highs and lows, and specific requests for assistance. By following these guidelines and utilizing the provided templates and resources, startups can maintain and cultivate relationships with investors, fostering trust and ultimately propelling their companies forward.