Keep Your Investors Updated
September 20, 2016 | By Kevin Vela
One of the things we preach to our clients is transparency with investors. Besides the fact that investors have certain information rights under state law, clear communication serves multiple purposes. (Note: investors do not get access to everything – confidential info, trade secrets, protectable IP, etc. – but they should have reasonable access.)
First of all, keeping your investors updated demonstrates respect for their investment. I think a lot of people who have not yet raised money think that investors treat startup-investing like a lottery ticket: buy impulsively, give no thought or analysis, and hope for the best. This is the exact opposite of reality. Yes, startup investors understand the inherent risk of investing in startups. But the reason why investors have disposable cash to make investments is they have been very, very, very successful somewhere else. They are intelligent and make good decisions. Through frequent, transparent communication, you can let your investors know that you are treating their capital with care.
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Second, communication keeps founders accountable. If, as a founder who has raised capital, you don’t understand that you work for your investors, then you likely have some frustrated investors. When you raised your round, you told your investors you were going to do x, y, and z. Show them that you are on that path. If you need to make a turn, that’s okay. Change is usually a good indicator of experience – your understanding of your business model creates separation between you and the guy behind you. Just let your investors know.
Third, assuming it is good news, providing updates keeps investors engaged. When you go looking for your next round, they should be the first place you look. And hopefully you’ve been able to keep the iron warm.
Fourth, your investors want to help. And you want them to help. Constant updates are a way to let them know what your needs are so they can jump in when it makes sense.
Finally, if something goes wrong, they’ll see it coming. Companies don’t fold up in a week; it takes a long time. Constant communication with your investors prevents the “what the heck happened” emails.
We advise our clients to send out an investor/advisor update at least monthly, but preferably weekly. I encourage them to carve out 11am–noon each Friday to draft an email and to bcc me.
Last Friday, the usual batch of update emails came in, and one of them was so strong that I wanted to share it on our site as a model for other startups. Shout-out to Taylor Cavanah, CEO of PetPartner, for keeping his investors involved with his rapidly growing startup. I changed up the names and numbers a bit, but everything else is intact.
Investors, Advisors, and Supporters,
I hope all is well. More great news.
The Good – August 2016
– Our goal for the month was $XXK in new subscription MRR. Again with only 3 closers and one of them gone for two weeks we hit our number at $XX,010. A huge shout-out to Gregor Clegane who closed $X.XK himself to get us there.
– We now have the framework for our next big product – Valyrian Steel. Prototypes for further customer research coming soon.
– Our total revenue for the month was over $XXXK. We could be a month away from hitting a $XM run rate.
Our Monthly Metrics:
- New Sales MRR Goal of $XXK $XX,010
- Total Locations ZZZ
- Total MRR $XXX,XXX
- Total New MRR $XX,XXX
- Total Revenue $XXX,XXX
- Total Expenses $XXX,XXX
- Total Cash In $XXX,XXX
- Total Cash Out $XXX,XXX
- Burn ($XX,XXX)
Our Rolling Metrics:
- Rolling MRR Growth 13.07%
- Rolling MRR per location $X00
- Rolling Net Churn -0.47%
- Rolling Gross Margin 61%
- Rolling CAC $X,XXX
- Rolling Burn ($XX,XXX)
- Rolling New LTV $XX,XXX
The Bad – August 2016
– Our cash flow looks phenomenal but is misleading. There were a couple of payments for Hand of the King Pins that have lagged a month so there should be another $XXK in burn that we will see in September. Fortunately, even with the extra burn the numbers are well below our model.
– Our CAC popped back up this month. On average we are still at that $XK number. We are over hired on the sales opener side so some of that is to be expected but we know the openers as a whole can be producing more. Fortunately, the 3 new hires are great and ramped up quicker than anyone we have had before. And our cash per location is still high, giving us 3 months to cash positive.
– Our Gross Margin was pretty low this month. This was due mostly to the fact that we over hired on the support side. We had 2 great candidates for squires that we couldn’t pass up. They should both graduate to Knights in September. I’ve added GM to the rolling metrics as this is an area I think we can improve. Margaery will be working with me to lower postcard costs and the sales team will continue to sell without big discounts on higher prices to boost that number.
Asks – August 2016
– Still looking for an affordable Android engineer in Braavos or Westeros. Good news we have 2 prospects right now. Also, looking for a designer.
– We need to fill our 3rd board seat. We have a very good candidate in Tyrian Lannister (invested in last round, light CFO work for us, experienced board member for tech companies, Master of Coins, conservative fiscal approach). Investors will get more info in a separate email but if you have any questions or suggestions please let me know.
Thanks and talk to you soon,
Posted in Funding & Capital Raising, Startups
Kevin Vela is the managing partner at Vela Wood. He focuses his practice in the areas of venture financing, mergers & acquisitions, corporate law, capital raises, and real estate investment activities. You can see Kevin’s attorney profile HERE.