What to share in an investor update
Over our series of blogs focused on pre-seed investment fundraising, we’ve taken a look at the fundamentals, highlighted the 10 things you should include in your data room, offered some insights into the best tools for keeping your workflow organised and unpacked some of the major reasons investors might turn you down.
In this blog, we’re going to explore the subject of pre-seed investor updates; if it’s relevant to your business then the first thing to say is a very warm congratulations! You’ve received some funding, possibly from angels or perhaps a venture capital fund, and you’re asking the right questions. Namely, what’s best practice when it comes to investor updates?
These are important to get right, because your first update sets the tone for how you communicate with your investors. This blog will answer some of the questions founders have about how to best structure these updates. We’ve also included a template that might be useful as a guide to work from. You can view it at the bottom of the page.
What exactly is the purpose of an investor newsletter update for a pre-seed company?
With a few exceptions, investors don’t tend to be quite as active in the day-to-day running of pre-seed start-ups as they are in later stages, and board seats aren’t as common as they are for businesses further along in their growth journey.
So there isn’t as much scrutiny, but the best founders are still proactive about managing communications, maintaining transparency with investors and keeping them informed with key updates and information about the happenings on their investment.
At this stage, a great investor newsletter should be sharing the key stats (quantitative) on how your start-up is faring, alongside a general understanding of how you’re tracking against the key goals you’ve set prior (qualitative included). The perfect example clearly outlines an idea of short-term plans and progress set against the wider context of the business’s long-term vision, all in a clear, easy to follow narrative.
Remember, clarity and conciseness are key: you don’t want your investors feeling overwhelmed (or even, heaven forbid, bored) with the amount of information or undigested figures in your newsletter, but you also don’t want them to come away from it without a clear sense of how you’re faring. A fine balance must be struck.
There isn’t much information in the way of metrics just yet, so what should I include in my investor update?
Given that a pre-seed start-up can range from pre-product all the way to revenue generating, there’s no one clear answer to this; each comes with a different set of metrics you’d do well to track.
Ultimately, the update needs to be meaningfully informative – not a data dump. It should be factual without being too complex, and ultimately show specific, quantitative measurements of progress from one period to the next.
One thing to consider is how straightforwardly accessible the data you want to report is. For a founder with a pre-seed business, there’s plenty to do besides write investor newsletter updates. The metrics should be straightforward to track and collating them shouldn’t be work in and of itself. The best idea is always to keep things short and sweet.
A few metrics we’ve come across in investor updates include:
- X months to launch
- Number of users on waitlist: (Month on Month (MOM) +/- x%)
- Number of Customers
- Monthly Revenue
- Gross Merchandise Volume/Gross Monthly Bookings
- Monthly Burn: £XX
- Cash in Bank: £XX
- Runway: X Months
How often should I send an update?
It all depends on what works for you as a founder, and what your investor expects. If you send them too frequently, you risk your investor glazing over; too seldom and your investor is left wondering if you’re still operating.
Monthly and quarterly updates are both commonplace. Some founders prefer to give snappy, high-level monthly updates. Others prefer to send something more robust through once a quarter, sometimes folding quarterly management reports in.
For us on the Octopus Ventures Pre-Seed Team, thinking specifically about the pre-seed stage, we think monthly is a sweet spot. Investors know that the cadence of businesses at your stage isn’t always regular, so it’s totally ok if some months have more updates than others.
What’s the best medium for communicating with investors, and should I use more than one?
Once again, it depends on what works for you. There’s a range of options: you can share text, via an email update or newsletter or record an asynchronous video or chair a live call for investors to dial into, with recordings send out after the fact.
Our philosophy, though, is that where possible it’s best to optimise for simplicity. We generally prefer an email update or newsletter.
When things aren’t going as planned, what’s best practice in terms of investor communication?
This is an important question, and one a lot of founders get wrong. No one likes delivering bad news – having some anxiety around it is only natural. It’s human nature to be tempted to gloss over negatives and highlight the positives, underscoring successes without talking about what isn’t going as well.
But still, if something has been declining over time, it really shouldn’t come as a surprise to your investors when it’s at its worst. Your newsletter needs to reflect the rough as well as the smooth – and nothing should be a surprise unless it happens suddenly and surprises you, too.
It’s also important that investors hear any the bad news from you first, especially if you’ve been aware of things going wrong. Leaving investors to hear bad news from the press or other media is extremely poor form. It’s sure to damage their confidence in you, and it also puts them in a difficult position. Remember, investors are accountable to limited partners (LPs). They’re a key stakeholder, and investors need to keep them closely informed. Withholding information from an investor impacts their ability to appropriately manage their portfolio and report to the LPs.
Which tools are best for automating and designing my investor newsletter?
We on the Octopus Ventures pre-seed team are big fans of automating routine administrative work, especially in cases when a founder with a young company and a lean team is already spread thin. A few helpful tools have caught our eye. For text, alongside plain old email there’s also Mailchimp or Visible.
If you’re recording a short video, Loom and Vimeo both work well, and if it’s a more robust, live, quarterly synchronous update, Zoom and Google Meet are both great for managing the call.
How do I protect confidentiality of information in my investor newsletter update?
For founders, this is a genuine and legitimate cause for concern – and it’s understandable. It goes without saying that it’s much easier to share information if you trust your investors – which is another crucial reason you need to pick the right ones. But it’s not always clear what’s confidential and what’s not, so to cover your bases include a small disclaimer highlighting the confidentiality of the information shared and flagging the intended audience. Here are a couple of examples:
This newsletter update is intended for investors in [company name] and it contains confidential information. Do not forward, share, or distribute any of its contents. If you received this email in error, please delete, and inform me on [email]
Information shared in this update is confidential, and it should not be shared with anyone else w/out consent from me. Please do not share any information about [start-up name] with any third party.
So there you have it: the basics of an investor update. Of course, it’s not prescriptive. Only you know the kind of relationship you have – or want to develop – with the investors helping your business take flight, and you should tailor your updates accordingly.
You can see an example template at the bottom. Remember, it’s only a guide (we’re looking at you portfolio companies! We’ll notice if this ends up coming directly back to us…) but it should offer a sense of the information to include and how you might lay it out.
And if you’ve read this blog and you don’t yet have investment, but have an idea you think might just change the world, then get in touch and tell us about it here.
Classic Newsletter Update Template
Subject: [Startup Name] Monthly Update 1
Hi [First name],
Welcome to [start-up name’s] monthly investor update.
Every month we share key metrics, updates and asks with investors. If you have any feedback, questions, or thoughts, hit reply.
📈 Key Metrics:
- Status on Product – X months to launch
- Number of users on waitlist: (Mom +/ x%)
- Monthly Burn: £ XX, XX
- Cash in Bank: £XX, XX
- Runway: X Months
- New Team Member/Partner:
- Key Ask:
💡 Reminder on what we do: One-liner summary/vision/why you exist
🛎️ Key Updates: [It’s important to share what isn’t going well, as well as what is]
- Customer Acquisition:
- Product Launch:
✅What’s Going Well
⚠️ What could be better
- Summary + Plan to address
🎯 Focus for Next Month
- Goal 1
- Goal 2
- Goal 3
🙋 Key Asks:
- Ask 1
- Ask 2
- Ask 3
📢 Shout Out:
- Shout out to X for Y, which helped us Z
If you’d like to catch up on any of the above, please hit reply or grab 10 minutes here [insert Calendly link] for a quick chat.
Thanks, and chat again next month!
Founder, and Team