So you’ve got pre-seed investors on board and you’re about to sign your first term sheet. But the relationship with your investors is only just starting — throughout your founder journey your backers will expect regular investor updates that keep them in the loop about the comings, goings, successes and failures at your startup.
But how do you put investor updates together? And what do VCs actually want to see from you?
Sifted spoke to investors from b2venture and 3VC, and founders from LEIA Health, a femtech startup focused on postpartum care and parental health, and Solu, a Finnish techbio startup tackling antibiotic resistance, to get their top tips.
What are investor updates?
Investor updates tell your investors what's going on with your company and how their money is being spent. They include things like highlights and lowlights as well as updates on key performance indicators (KPIs). They are also an opportunity for you to request things from your investors.
Why do you need to send investor updates?
- You can cut down on unnecessary catch-ups by delivering key information over email, leaving meetings for effective discussion.
- You can increase trust with your investors and strengthen the relationship. "Keeping people on the same page is quite effortless with updates, where you can both ask for help, intros and sparring thoughts — and get challenged," says Sam Sihvonen, cofounder of Solu.
- It’s an opportunity to review and reflect on what has happened in your company over the past month — these considerations include what’s going well, what could be improved and what help you need.
- You can lean on your investors for advice and insights on any issues your startup is facing.
How to write investor updates?
“First of all, it's very important that you speak to investors about the format they like,” says Johanna Junkermann, an associate at b2venture. Some investors like them to be in an email, others in a Google document, or a presentation — it depends on what works for the company and the investor.
Your investor updates should include:
Executive summary
This will include anything major that's happened over the month:
- Highlights — any key breakthroughs in products or sales, or any new team members;
- Lowlights — any challenges you’re facing in scaling your product or any milestones that have been missed.
KPI Dashboard
This is a more detailed section with some key metrics you’re using to measure progress.
- Information investors need for their LPs, including:
- Revenue;
- Liquidity;
- Full-time equivalent (FTE), a measurement of employees workloads;
- Earnings before interest, taxes, depreciation and amortisation (Ebitda).
- Company-specific metrics, for example:
- Average daily users of your product;
- New product features;
- Net revenue retention;
- How product development is progressing.
- ESG-related KPIs, like carbon footprint and employee retention.
Outlook
Any upcoming product launches or new ideas that the company is working on.
Asks
Tell your investors what they can do to help, like introductions to potential clients or their input on your strategy.
How often do companies send out investor updates?
Cofounder and CEO at LEIA Health, Astrid Gyllenkrok Kristensen, sends out monthly updates that include key metrics and general updates, and then longer quarterly updates that go into more depth and include ESG reporting.
What you send investors can also depend on the sector your startup is based in: “As we work in biotech and our industry moves a tad slower than others might, we update our investors on a monthly basis,” says Sihvonen. “We’ve seen that sending updates once a month keeps the updates highly relevant but frequent enough to keep the sense of open communication going.”
What are investors looking for from your updates?
Eva Arh, partner at 3VC, explains that investors are broadly looking for “what the company is working on right now, what are the next milestones and what is our progress towards those milestones”. These don’t need to be very long or take a lot of time, she says: “Those who do it really well tend to just use a few slides. The core shouldn’t be longer than around 5-10 slides.”
The specifics of what investors need to know depends on whether your company is B2B or B2C, Arh adds. For a B2B company, “you might want to track the net revenue retention” and for a B2C “you might want to track daily active users vs monthly active users”, she says.
It also depends on your company's funding stage. Junkermann says for a seed-stage startup she'd want to see sales numbers or the funnel for how sales will progress going forward. “This is also interesting at pre-seed,” she adds, “but at pre-seed, the focus is more on the tech and the product perspective, and also on the team.”
A key piece of advice from investors is to explain the data you’re presenting in a couple sentences. Including a ton of data without explaining what it means can leave investors asking ”should we be worried, should we be happy, what does it mean for us?”, says Arh. Written commentary also allows founders to explain why certain targets haven't been hit and what they're planning to do to get back on track.
ESG considerations are also becoming increasingly important. “We very much believe that it sets the foundation for growing a successful company. Because ultimately, if you start this ESG KPI reporting too late in a journey, then you might miss some indicators in the early stages,” Junkermann says. These indicators include things like:
- How diverse your employee base is;
- How high the gender pay gap is;
- How high your carbon footprint is.
What are common mistakes founders make?
- Not sending the investor updates — even if things haven’t changed much or if there hasn’t been much success, investors still want updates.
- Reporting different metrics each month.
- Spending too many resources on investor updates — it should be a simple process that requires you to just plug in internal metrics that can be sent over to investors.
- Exaggerating — ”some founders try to make it sound good all the time, but it's good to be transparent about the challenges. We know that it's not just a walk in the park, it’s ups and down. It’s important founders feel they can be transparent, be honest and ask for the help,” Arh says.
- Too long and too much information (Eva’s top tip: put extra info in an appendix).
- If you're using a document, remember to email investors when you update it — ”it sounds simple but you wouldn’t believe how many people forget,” Junkermann says.
Top tips from founders
Astrid Gyllenkrok Kristensen
- Always start with a summary of key takeaways to make sure that even the most time-strapped investor gets the most important information.
- Structure the format of the updates so the investors can follow month-on-month process and compare with previous reports.
- Always include an "ask" slide at the end where you utilise your investors' expertise and networks — it could be things like warm intros to potential clients, recruitment or input on specific parts of your strategy.
- As an impact-driven startup it’s crucial to balance metric-driven and quantitative reporting with real-life user stories and outcomes, as it’s not only putting things in perspective/context but could also be leading indicators for future financial metrics.
Sam Sihvonen
- Keep it brief.
- As we work in a complex domain with biology and antibiotic resistance, it’s easy to use your company’s internal jargon. I put a lot of effort into explaining abbreviations and any possible jargon in my updates.
- Sometimes, when there are no major updates, I mindfully don’t sugar-coat or “fill up” a section with minor changes — this brings no value for us nor the investors.
