2 min read How do you keep your investors happy? Keep them informed.
I remember my first angel investment back in the 1990s.
This was before I knew you were supposed to set up an agreement with the entrepreneur on how, how often, and what they would communicate to the investors.
After several months of hearing nothing, I finally called the President of the company and asked for a written update, including financials.
A week later he sent me a short two-paragraph email along with a spreadsheet attached showing the financials.
And so came the red flags.
There are several items to point out here:
- The two paragraphs by no means filled in the details of the business. To this date, there are holes in their explanation of what went on in the business.
- The financials of any company should not be in an Excel spreadsheet. They should be in Quick Books. Excel has no audit trails, no security or validation. Anyone can change the formulas. In fact, several of the columns of financial data didn’t add up in the bottom row.
- I only received this after I demanded it and I never received another one. After that experience, the entrepreneur wanted to discuss over the phone and found excuses to not send out the financials again.
These are all red flags indicating that things are not going well. Later the company went bust.
It is crucial for the entrepreneur should send regular, informational updates to the investors.
Be transparent about the results and share both bad news as well as good news. Stick to facts about the current state of the business and not just forecasts and plans.
Provide short status updates about major initiatives, milestones missed or hit, and major customers or partnership opportunities.
Share the status of product development including test results, beta tests, and setbacks or breakthroughs.
Cover the key financial metrics, including actual versus forecasted revenues, cash on hand, current burn rate, and monthly and year-to-date revenues.
If additional fundraising rounds are underway, provide the status of fundraising goals.
Share details about new employees, finding a great co-founder, or securing an experienced advisor.
Detail key customers landed, important opportunities, and major marketing initiatives.
Keeping your investors informed also maintains the relationship, leaving the opportunity open to ask for follow-on funding later.
Hall T. Martin is the founder and CEO of the TEN Capital Network.TEN Capital has been connecting startups with investors for over ten years. You can connect with Hall about fundraising, business growth, and emerging technologies via LinkedIn or email: email@example.com