On top of all the responsibilities that come with running a startup, as a founder, putting together an investor update can feel like a chore. Though it may be a task you want to keep putting off on your to-do list, keeping your investors engaged and in-the-loop is very important. Here’s a breakdown of what you should include in an effective investor update.
Why do I need to update my investors?
If the idea of putting together an investor update feels like a burden, we invite you to put yourself in your investor’s shoes. They’ve taken a calculated risk by investing in your company, you kind of owe it to them to keep them looped in. You never know when you may need help from your investors in the future. Regular updates help to build trust and keep investors engaged in what you’re doing.
Failing to provide investor updates is simply poor form; however, you may also be legally obligated to provide updates. The frequency at which they must occur, and the information required depends on the type of offering used to raise investments. At MicroVentures, we generally ask the companies we have made primary investments in to provide us with quarterly updates that we may pass on to our investors. Under SEC regulations, companies who raise via Regulation Crowdfunding are obligated to provide an annual report for investors on their website that must be filed within 120 days of the fiscal year covered by the report. There are a few circumstances after which a company may no longer be required to provide an annual report, and Reg CF issuers should review their obligations on an annual basis. (Learn more about the specifics involved in reporting on Regulation Crowdfunding offerings.)
What do I need to include?
There’s no one-size-fits-all template here, but there are definitely a few key sections you want to be sure to always cover in your investor updates.
Executive Summary
Your executive summary should lead your update. The formatting is up to you, but it should briefly address major changes since your last update, such as milestone progress, big wins, setbacks, key hires, etc. If an investor skims the update, the most important things they should know need to be highlighted here.
Launches
New product or service launches are a big deal and should be highlighted early in your investor update. While many may already be aware, never assume that they already know about it.
Financials & KPI’s
The financials and KPI’s that are important to include in your update will depend on your industry and business model. A few basics to include would be:
- Revenue
- Cash & burn rate
- Margins
- Sales numbers
- Customer traction
Whatever you choose to include, it’s important to include the same metrics across all updates, even if they’re not always positive.
Goal progress
Typically, a pitch deck will include specific milestones along your product roadmap. Investors will often want to see metrics on where you’re at on reaching these goals. If you’re dealing with challenges in meeting your goals, this is a great time to be transparent about those as well as your wins.
Key hires
As your team grows and changes, be sure to include any new key hires in your update, including their expertise and how they are anticipated to help the company reach set goals. Board member appointments are also fitting to include here.
Asks
Your investors want you to succeed. If there is something you need that you think your investors may be able to help with, don’t be afraid to ask. Whether it be finding talent, scoring an introduction, or addressing a challenge, let them know.
Practical tips
Keep it consistent
Updates should be consistent in both cadence and content. The schedule you set is up to you, whether that be monthly, quarterly, or annually. Content-wise, you need to make sure you’re tracking the same information over time so that you can show your progress. There are plenty of templates out there you can base yours off of and change to suit your needs.
Keep it to the point
This isn’t the time to offer a page long letter from the founder. Keep it brief, to the point, and avoid adding unnecessary fluff.
Final Thoughts
Investor updates don’t only benefit investors – they benefit you too. Tracking goals and metrics can help give you a better macro-level view of your efforts, and over time will just become a good habit. Similarly, they help to build better relationships with your investors over time, which can only help your business in the long-run.
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The information provided does not, and is not intended to, constitute legal advice; all information, content, and materials are for general informational purposes only. As you would with any legal matter, please contact a qualified attorney to obtain advice with respect to investor updates.
