startup investor update

How To Create A Startup Investor Report That Builds Trust

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A Startup Investor Report is an essential and expected part of operating a business when you start a business where there are other investors and shareholders besides yourself.

Get Your Startup Investor Report Right – And Your Team Will Be Tight

Investor reports are vital for any startup business. It’s important to update your investors on the changes your company experiences. Reporting to your investors helps build trust with them as well. Financial dips and peaks, new expenses, market changes, important hires, and more are all critical pieces of information that your investors want to know about. This is because your investors not only provide you with capital. They also provide you with helpful advice, expertise, and networks to help you succeed.

Now that you’ve secured those investors, you need to focus on keeping them happy, maintaining their faith in your product, and leveraging their expertise to your business’s advantage. 

Here’s where investor reports come in.

Apart from what’s included in this post, I highly recommend you steal ideas from the best of the best. Founder University by Jason Calacanis is one such example of great content on this subject.

startup-resources

Why Sending Investor Updates Is Important

Sharing monthly or quarterly reports to investors is a best practice that will keep business angels, VCs, and PEs engaged with the company. The most important benefits of investor relations are:

  • Alignment: investors like to know how their money is doing, as they are usually calculating the potential return on their investment. It is recommended to keep them in the loop, even if it’s to share bad news. Investors should not be surprised to know your company is doing really well/badly and sending investor updates is an easy way to be predictable. As Jason Lemkin puts it: “Getting a rough investor update, (ideally with a little context). Still 20x more confidence-inspiring than no update at all”

  • Easier fundraising: the transparency that investor updates bring will help in future financing rounds, as existing investors may proactively ask to invest more or participate as co-investors. If an existing shareholder knows how the company is doing, you will get their “yes” way faster, and they have may even already accounted for it.

  • Engagement with potential investors: a best practice to keep potential investors in the loop is to send them investor updates. If you are wary of sharing some financial metrics, you could always make two versions of it, one for existing shareholders in the cap table, and another one for external stakeholders. Sending them updates will also give you insights into which ones are the most engaged by tracking email opens, clicks, and reading time with tools like Capboard.

  • Legal requirement: in some countries and depending on the shareholders’ agreement, it is a legal requirement to keep all your shareholders up to date about some topics, like financial performance, lawsuits, etc.

What Should You Include In Your Startup Investor Report?

Your updates should be consistent in both frequency and format. Consistent formatting lets your investors compare reports with ease, and consistent reporting builds trust with your investors.

Give an all-encompassing picture: Most investor updates include these five areas:

  • Highlights and Lowlights, which showcase your main takeaways in an easily scannable display;

  • Financials and KPIs, which include specific metrics that measure your company’s success;
    Month-over-month changes in your key performance indicators provide a quantitative and objective view of your startups. Include 3–5 important metrics about finance, growth, and engagement.

    Finance
    Revenue: $11,200 (+27% from last month)
    Expenses: $5K ($1K marketing, $3K salaries, 500 office )
    Burn rate: $3.5K monthly, we have 18 months runway.
    Cash in the bank: $
    EBITDA: $

    Traction
    Churn rate: %, an improvement of % vs last month.
    Customer acquisition: $
    Customer Lifetime Value: $
    Orders per Customer: #
    Time on site before order
    Total user accounts: #
    Active users: #
    Paying users: #

  • Customer Wins, which showcase unique stories about new customers, customer metrics like net promoter score, or customer milestones;

  • Key Hires, which demonstrate important and exciting changes to your team;

  • Asks, allow you to ask your investors for support, be it through fundraising, network introductions, or market advice.

About the Author

James Spurway is an Angel Investor, Mentor, Advisor, Speaker, former Commercial Pilot, and Author who specialises in raising debt and equity capital. He strives to model diversity, equity, and inclusion in the founders he agrees to invest and work with. He has paused his angel investing activity to focus on raising his first US$ 50M venture capital fund, which will invest in startups that can accelerate the achievement of net zero emissions. James spent the past 33 years living in Hong Kong, Vietnam, Germany, Switzerland, Monaco, the USA, Thailand, the Philippines, Singapore, and Australia, his country of birth. In that time, he started 10 businesses, exited from seven, shut down two, and kept one. He has invested in a total of 50 startups since 2001 and had six successful exits.

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