html

Why Frequent Investor Updates Are Important

Regular investor communication is a crucial entrepreneurial habit, offering numerous benefits for both startups and investors. Here are the main reasons why:

• Keeps Investors Informed: Investors have a right to know about their investment's progress, and regular updates ensure they are in the loop without needing to constantly ask.
• Maintains Top-of-Mind Awareness: Consistent updates remind investors of the startup's journey, making them more likely to provide advice when needed or lend a helping hand with hiring, funding, or networking.
• Demonstrates Respect and Communication: Regular communication demonstrates respect for investors' contributions and establishes the entrepreneur as a reliable and communicative partner, which is beneficial for future funding requests.
• Provides a Strategic Perspective: For the entrepreneur, writing these updates encourages a macro-level evaluation of the business, forcing them to reflect on growth, strategy, and overall performance. This perspective can be easily lost in the day-to-day hustle.

How I Write Investor Updates

The author shares their personal approach to writing effective investor updates, emphasizing honesty, transparency, and a focus on key information.

Their updates typically cover the following sections:

1) Respect Their Time

Investor updates should be concise and well-structured, catering to both readers who want the full story and those who prefer a quick overview.

• Lead with the big picture to capture attention and provide context.
• Use bold headlines, whitespace, and clear language for easy readability.
• Maintain consistent category order for easy navigation and information retrieval.
• Bold and emphasize important asks or urgent matters to ensure they are not missed.

2) DDPN: Done, Doing, Planned & Numbers

This section forms the core of each update, providing a clear snapshot of the company's progress and current status.

• Done: Highlight key achievements and milestones since the last update.
• Doing: Outline ongoing activities and initiatives aimed at driving business growth.
• Planned: Share upcoming plans and strategies for the near future.
• Numbers: Include crucial metrics such as customer numbers, churn rate, recurring revenue, burn rate, and cash on hand.

3) Other Wins, Fails and Needs

This section delves into other noteworthy events, challenges, and areas requiring attention.

• Wins: Showcase positive developments beyond the DDPN section, including PR successes and significant growth milestones.
• Fails: Be transparent about setbacks, such as downtime, lost accounts, or any issues that might impact the company's health.
• Needs: Identify specific areas where assistance is required, such as hiring needs, potential partnerships, or strategic challenges. This naturally leads into the 'ask' section.

4) The Ask

Leveraging the strong relationships built through regular communication, the entrepreneur encourages investors to go beyond financial contributions and actively participate in the startup's growth journey. This section outlines how to approach the 'ask':

• Seek assistance from investors to address challenges or unlock new opportunities.
• Requests can range from introductions to expertise, leveraging investor networks and experience to accelerate progress.

5) Be Totally, Uncompromisingly Honest. No B.S.

The author strongly emphasizes the importance of honest communication with investors. Sugarcoating struggles or presenting a false picture can undermine trust and hinder the valuable contributions investors can offer.

• Investors are experienced and understand the challenges inherent in startup growth.
• Honesty fosters respect and allows investors to provide valuable advice based on their experience.
• Being open about struggles demonstrates authenticity and a willingness to learn from setbacks.

How to Apply This to Your Business (Even if You Don't Have Investors)

The principles outlined in this article can benefit entrepreneurs even without formal investors.

The author recommends writing hypothetical investor updates regularly, as it provides a valuable framework for self-reflection and strategic analysis of the business:

• Forces entrepreneurs to step back from daily operations and gain a broader perspective on their business.
• Encourages a more structured approach to evaluating progress, identifying challenges, and developing solutions.
• Offers an opportunity to articulate goals, strategies, and performance metrics, enhancing clarity and direction.

In conclusion, regular investor communication is an essential practice for building strong relationships, fostering transparency, and accelerating business growth. Whether you have investors or not, embracing the principles of open communication, honesty, and strategic self-evaluation can significantly benefit your entrepreneurial journey.