Most early stage founders don’t have a board of directors, so providing regular reports on the state of their businesses isn’t something that’s required.

So, how should these founders create accountability for themselves and their teams? One of the best ways is to provide consistent updates to investors. 

Vijay Rajendran, who leads the portfolio value team at 500 Global, says “the difference is massive” between the companies that send and don’t send investor reports.

“We write in order to think,” Rajendran said. “In a world where you are preoccupied with hurriedly building the proverbial plane while in the air, this reflection is very valuable.” 

Processing all that’s happened over a given time period can help founders better understand and articulate where their company is heading, Rajendran explained. 

Plus, he said, many founders don’t consistently send updates, so “just writing them already makes you above average in the eyes of investors.” 

Recently, 500 Global invited Mike Preuss, CEO of the investor communications platform Visible, to share best his practices for sending effective investor updates. The talk was part of 500’s fundraising workshops series, which provides insights and expert recommendations for founders in its network. 

Here were the key takeaways:

Why are investor updates so important? 

Giving investors consistent insights into your business allows them to spot challenges and opportunities sometimes before you can. 

Also, startups that provide regular updates are three times more likely to receive follow-on funding from existing investors, Preuss said, according to a study from his company. 

And, updates don’t need to be limited to current investors. They can be sent to prospective investors to drum up interest for future rounds as well.

What information should investor updates include? 

Formats can vary, but Preuss stressed the importance of keeping updates short and to the point. And, don’t make your investors sign into any special portals — plain, old emails work just fine. 

In terms of content to include, Preuss suggested:

Highlights: The things that have gone well since your last update. 

Lowlights: Your current challenges and how you’re trying to solve them. 

Asks: How can an investor help, like making introductions to potential customers, candidates, or other investors. Preuss said “asks” can be the most important part of an update, but he stressed that they should be as specific as possible. 

• For example, don’t just say you’re looking for an introduction to companies with over 1,000 employees. Instead, say that you’re looking to talk with marketing VPs at North American companies with over 1,000 employees in the consumer packaged goods industry. 

Thanks: Close the loop and thank the investors who helped you with your previous asks. 

• Preuss said giving thanks can gamify things a bit since most investors want to be seen providing value. So, thanking investors publicly can actually lead to more of them helping you out in the first place. 

Customer story: Tell a compelling story of how you’re changing customer behavior or how customers are interacting with your product. These stories are a way to humanize your updates. 

KPIs: Provide a set of quantitative metrics (no more than five or six), which can include… 

• Cash on hand 
• Cash burn 
• Runway 
• Revenue 
• Headcount 
• And, a “north star” KPI that’s indicative of what future revenue or traction will look like.  

Preuss said keeping metrics consistent across updates is key — don’t just “cherry pick” the ones that look good each time. And, if you do want to change the metrics you include, call it out and let your investors know why you’re doing so. 

Also, if you’re sending updates to potential investors, consider not including some metrics that might be sensitive, like cash burn or cash on hand. 

How often should you send investor updates? 

Consistency is key, but cadence can vary based on the stage of your company. 

Preuss suggested:

• Weekly updates for companies just getting started. 
• Monthly updates for Pre-Seed to Series A companies. 
• Quarterly updates for growth stage companies. 

Updates may take some time in the beginning, but Preuss said the more often you write them, the easier they’ll become. Eventually, updates shouldn’t take founders more than 30-45 minutes, he said. 

Final takeaways 

Sending regular updates is a way to show investors that you’re an engaged entrepreneur and a good steward of their capital. In other words, updates help founders build trust with their investors. 

Writing investor updates is also an important time for founders to reflect on what’s happening with their business and make changes if necessary. 

Finally, Preuss said radio silence (or, the decision not to send an update) often stems from founders not having good news to share. But, he stressed, investors only succeed when their portfolio companies do well. 

So, if you’re running into tough times, don’t hide from investors. Instead, let them know what’s happening so they can help. 

Are you a founder in the 500 Global network? Want to attend workshops like this in the future? Visit our website to learn more about our upcoming founder events.