On investor updates
How to write an update that will actually get you the help investors promised you
Despite what popular memes would have you believe, your investors actually want to help your startup. At least, the good investors do. And it’s usually not worth prioritizing what the bad investors want.
So, by popular (investor) demand, I’m putting together a guide on how to write one.
General guidance
Format
Keep the language concise and the graphics simple - many recipients will be reading this on their phone, maybe in an Uber, so make it very easy to parse what you’re asking for and how the business is faring.
Length
Try to stay under 1.5 pages unless there’s been a major development (i.e. a pivot) that needs further discussion. At which point, consider whether a live call is better.
Frequency
Send (similarly structured!) updates regularly.
After a while, the updates will feel like comfortable templates, and drafting them will be an exercise in business hygiene rather than something you dread.
As with many things in life - practice makes perfect!
0. Company description
Remind recipients who you are and what you do. If you have a large distribution list - for example, if you’re including potential investors, or mentors from an accelerator - it’s highly likely that the readers might not remember your startup.
If you’ve recently rebranded, remind readers not just what you do, but what your former name was. If Prince did it for decades, you can do it for a few quarters.
This is also a natural place to remind readers what stage you’re at (for example: “we closed our Seed round in October 2022”, or “we are focusing on building out our MVP”).
1. Lead with #Asks
List the 2-3 things that will meaningfully help your startup over the next month. Be specific -
Don’t say: we want customer introductions
Do say: we are looking to meet VPs in clinical roles at pharmaceutical companies or hospital systems
This is not the opportunity to expand on strategic approaches - be concise and provide an easy opportunity for your VCs to give you tangible support.
2. List the key metrics
For all of these include this period’s (i.e. today’s) AND last period’s. Don’t “re-state” (aka re-calculate) metrics - give the figure you gave in the last update.
If you’ve been forced to change how you calculate the metric (this should happen very rarely) then explain both the change and why you made it. Show both sets of metrics under the new and the old method.
Burn
Start with the most important metric - cash burn. If you run out of cash, your startup is dead and nothing else matters.
Include both gross and net burn, and footnote what you are assuming for net burn (current revenue levels? conversion at some percentage of the pipeline? contracted revenue?).
Sales
Next, cover sales. Include the sales metric that is most relevant (e.g. ARR, MRR) for your sector, as well as the number of customers.
If you’re including pre-revenue metrics (like total contracts signed) then make sure you break it down into a receivables schedule - in most cases, the right breakdown is cash receipts contractually due over the next 12 months / until the end of the year, but exercise your own judgement. If there are benchmarks that need to be met before receiving the next significant tranche, note or footnote these here.
Avoid the temptation to quote bookings as revenue - you might think this gets investors off your back this time around, but it only creates a problem on the next update, when the “sales” figures suddenly drop. The loss of trust that occurs after you’re forced to explain yourself may become insurmountable.
For all the metrics here, compare them to the budget - are you over-delivering compared to what you promised your Board?
Cash on balance sheet
Self explanatory. Don’t get cute - don’t do things like adjust for expected receivables. Just the actual cash that actually exists in your actual business bank accounts, please.
Below that, note how much you’ve raised to date and when/how big your last round was.
True North metric
Now is the time to include your True North metric - the key metric that best encapsulates your current goals and business progress. For early stage companies, this might be something like the number of design partners onboarded. For older startups, this might be something akin to the total transactions processed in the period, or the number of users on the platform.
Compare your True North metric to what you promised investors at the beginning of the year / the last time you raised money.
Headcount
For most startups, this is full time salaried employees. If you have meaningful additional headcount data (significant part time employee base, interns) also include it here.
Show progress against the hiring plan, including any updates you’ve made to the plan and why (e.g. due to a change in focus from growth to burn management).
You can add a qualitative section here to note any key changes (conversion of a key contractor to an employee, any large layoffs in the period, important senior departures - whether due to quitting or termination, key hires), or you can leave it to the management discussion (below).
Sales pipeline and retention
Share both a quantitative snapshot of the sales pipeline (risked) if available, and a qualitative list of key customer wins, losses, and departures.
3. Management discussion
This is the section for a qualitative overview of what happened during the period and what you foresee as the risks and opportunities over the coming period.
This section can be thought of as The Good, The Bad, and The Ugly.
(Shoutout to Leo Polovets of Susa Ventures for the analogy, shamelessly recycled from his awesome template post, which you can also read here)
Include any notable developments - key hires, key departures, key customers signed, key customers lost, key progress on integrations or legal negotiations - even if you mention them elsewhere.
4. Shoutouts
Note which investors, team-members, or other stakeholders have been especially helpful since the last update. This sets up a friendly competition between your investors to actually provide the assistance they promised.
5. Easter egg
Add a little treat - a joke, an image, a short anecdote, a link - for those investors who made it this far. This encourages the recipient to read the next investor update to the end.
6. Next update
Give guidance on when your investors should expect to hear from you again - will you be sending another update next quarter or next month?
Thank you to Sunil Pai of AngelList, Leo Polovets of Susa Ventures, the always-awesome James Cham and Roy Bahat of Bloomberg Beta - whose own (and very awesome) investor update template is here, Halle Kaplan-Allen, Alex Tang, Wiz of Spacecadet, Nik Milanovic of The Fintech Fund, Jake Chapman, fellow (non practicing) actuary Josh Taub, Alex Miller, Danielle Strachman of 1517 Fund, Hari Raghavan, and Packy McCormick of Not Boring Capital for helping put this guide together, and of course, Sheel Mohnot of Better Tomorrow Ventures for spurring the very idea!
I get by, with a little help from my friends!