At some point after investors funded your business, you started thinking about updating them at regular intervals to keep them abreast of the business. Of course, sending updates is the right thing to do since they are equity holders too; but you also want to keep them informed so that you maintain a good relationship with them and so they can help you as the business grows. Additionally, it's worth noting that many early stage investors often negotiate information rights, so they may also have the right to know what's going on and request this information from you proactively.
As an early stage investor, I like to stay in touch with my portfolio companies regularly, but I don't need to see extensive reports on a daily or weekly basis. A clear and concise monthly or quarterly update keeps me in the loop and gives me the opportunity to contribute to the business as needed. While updates can vary in content and length, I usually recommend covering five main items that can be summarized succinctly in one or two pages.
1. Milestones achieved
What are the major milestones you've achieved since your last update or interaction with investors? This could include but is not limited to clients won, partnerships developed, products created, patents filed, advisors recruited, awards won, and/or funds raised. Whatever the case, I like to see the top accomplishments in the business since the last update.
2. Cash burn and runway
Investors want to know how much cash is being spent by the company each month and how many months the company can operate until the current cash in the bank runs out. In an ideal scenario, the company has crossed the break even point and generates enough cash to cover all costs of operating the business. However, with fast growing startups, that is not always the case, and investors need to understand the company's cash position so that they know when the company needs to secure more funding to prevent it from ceasing operations.
3. Major metrics
The key metrics can vary by company and industry. For example, you may track the number of users visiting your website and how long they engage with the content, the number of current customers and customers in your pipeline, and/or your revenues and gross margins. You may also track how the above numbers change over time. Whatever the relevant metrics for your company or industry, you'll want to zero in on the top 3-5 items and provide the data to investors as a snapshot of the health of the business.
4. Team changes
As a growing company, each new member you recruit to your team could make an incredible difference in development of the business. In the early stages, new positions in sales, technology, or finance can be game changers. This is the section in the update where you highlight any and all major additions. Similarly, experiencing a key departure can be destabilizing (or perhaps a positive development). Whatever the situation, investors want to know about any major hires or departures on the people side of the business.
5. Help needed
Smart entrepreneurs also use their investor updates as a method of outreach to investors on areas where they need help. If you need assistance with your goals for the next update, future fundraise plans, or recruiting key hires, this is the section where you can highlight all of your asks. One of the biggest ways your investors can help you is to make introductions, so don't be shy in naming specific people (e.g. journalists, potential clients, etc.) you're trying to reach whom you believe can help your business.
Keeping investors apprised on the health of the business is not only the right thing to do, it's the smart thing to do. An informed investor can be a helpful investor, which can result in a more successful company. Maintaining positive investor relationships can also make future fundraises more seamless. Of course, you can always tailor your update in style and substance for what works for you, but if you include the five items above, you should be off to a good start!