In my experience the best performing companies tend to write the most thoughtful monthly investor updates. That’s not to say that there’s a causal relationship - great updates obviously don’t directly result in great companies - but I think that the act of consistently writing updates pushes founders towards clarity and thoughtfulness around their businesses
More specifically, I think there are two main reasons to write monthly investor updates.
The first and obvious one is that it’s a way to keep investors updated on what’s going on in the company. Founders usually only engage with some of their investors, typically the larger ones, through recurring board meetings or more casual catch ups. Smaller funds and angels will only stay informed through written updates. Apart from helping founders update their entire investor base, monthly updates also help in activating it. Companies with thoughtful monthly updates tend to have the most engaged investor base, which makes sense because informed investors can adequately assess where they can potentially help. Investors also appreciate the effort in keeping them updated and as a result be more inclined to reach out and help.
There’s sometimes a tendency to stop writing updates as consistently or at all when things aren’t going well. That’s a mistake. Rough patches, which every startup will inevitably experience, are precisely the moment when investors can (should) help the most. Not every investor will respond constructively, but the good ones will.
The second reason for writing monthly investor updates is that they are a forcing function for founders to distill details into their essence. Founders spend their every waking minute obsessing over their business. Especially in the early days, founders are deep in the weeds and involved in most functions of the company. Investor updates are a good opportunity to take a step back and look at the bigger picture. I’ve had numerous founders tell me that getting into the habit of writing investor updates has helped them structure their thoughts and communicate more clearly.
While there’s no correct way to structure an investor update, my preference is an email, written in bullet format, with the following structure:
- TLDR - summarise the most important developments
- Metrics - update the core metrics you’re tracking and optimising for. Always include monthly burn and projected runway
- Accomplishments - what’s going well?
- Setbacks - what’s not going well? Be honest here, there’s no point in sugarcoating
- What’s next - the main focus for the coming month
- Specific asks - what do you need from your investors?
- Bonus: Previous investor contributions - highlight previous contributions from investors. Appeal to their competitive nature and get them to work for you