Clear, insightful, and constructive communication between startups and their venture capital investors is really important. Providing your VCs with regular and transparent updates allows them to help your startup navigate issues and build success.
Here are three things you should be doing in order to make the most of your Venture Capitalist’s time, money and wisdom.
1. Communicate with Your Investors!
The first thing may sound really obvious, but actually communicating and sharing updates with your VC investors is something you have to remember to do!
Here at Kruze Consulting, we work with 800+ startups and it’s astonishing how many of them don’t send their investors a monthly update. Please, send your investors regular updates! Ideally you should have some form of communication on a monthly basis and if you can’t do that then send updates on a quarterly basis at the very least.
2. Send Regular Updates!
This leads onto our next point. To truly keep your VC in the loop, please try and send regular, scheduled, consistent updates that keep everyone up to date on the progress of the company. On this note, founders should respond to their investors quickly and efficiently also.
Please don’t just send an update every six months, or every year, or simply when you feel like it, and especially don’t send them only when you’re in trouble. That seems to be a common occurrence and it doesn’t make much sense – we will get to that later.
You should send updates:
● On a regular day. For example the 1st, 10th or 15th of the month
● Monthly or quarterly
● Every time you’re due to send one!
Sticking to a schedule creates a steady flow of communication with your VCs and creates a cadence you both come to know as routine. You must get into the habit of it, like you would exercising or eating well and, in turn, it will benefit your startup.
Investors can be so much more helpful when you’re touching base with them frequently. If you’re a startup founder: just do your investor updates!
3. Engage in Constructive Communication
Now, the first two steps are relatively simple but the key to it all is engaging in high quality, constructive communication. You want to send updates and information that your investor can assess and return with insightful, instructive commentary. Check out our VC investor update template here.
Here is the main things we recommend you include in your updates:
● Your cash position
● The previous month’s burn rate
● If you have revenue, an ARR estimate (the rough plan for the next 12 months).
● The wins and misses of the last month; what went right and then what went wrong
Once you’ve covered the information regarding the business, then you can go on to put a request in at the end. You can ask your investors to send you some more customers, for an introduction to their favorite VCs, or even ask for recommendations for the role you’re currently hiring for. By including real-life commentary you will actually set your startup apart. It’s a very simple framework but it works really well.
Don’t Be Afraid to Share the Bad News Too
A lot of startup founders achieve step 2 easily and send the regular updates. However, they often miss the mark with the content. They might be scared to share certain information, or they might be worried about bearing bad news, which stops them from saying anything until the last minute – when problems actually become a lot harder to solve.
You shouldn’t be afraid to keep your investors up to date on the highs and the lows. Bad news actually builds credibility and helps all of your investors figure out how they can help you. You would be surprised at the amount of times an investor has been given bad news and they’ve had a similar experience and know a way to solve the issue. So don’t be shy. Aim for insightful commentary and include the bad news.
VC Investors Understand Startups
No one expects startups to be easy or straightforward. It’s okay to include the tough stuff that you need help on. If you do that and you reach a point of consistent insightful commentary, your life will be much easier. By giving regular updates full of useful information, your investors can help you more and it’s a win-win all around.
If you have any other questions on VC communication, valuations, startup investing, startup accounting, taxes, or venture capital please contact us. You can also follow our YouTube channel and our blog for additional information on accounting, finance, HR, and tax for startups!