What VCs Want to Hear In A Downturn?
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Today, I'm outlining what VCs want to hear from Founders they have already invested in and outline the the best possible investor update.
How to Update Your Investors
Founders always have an informational advantage.
The truth is: not sharing can never do you good. When your investors don’t hear from you, even if everything is going well, then they often assume the worst.
Blindspots breed mistrust and rumination, and that doesn’t work in your favor later on.
And if something bad is actually happening and you don’t share, then you lose all credibility the minute they learn you had the information and chose to not tell them.
Think about it: if you had to go back and ask them for more money, what position would you like to be in?
You must set clear expectations on what you will report, how often you will report it, and what those reports will look like.
To execute on your end, you need a repeatable investor update template. It should be as brief as possible, but it should include the following, preferably in this order:
An executive summary. This should be in the document you attach to your update email. You want your updates to be frictionless for your investors. It should include:
Highlights. What are the achievements, wins or milestones have you surpassed? Think about sales, marketing, hiring, product or anything else that’s relevant. This should be about three to five bullet points.
Lowlights. What challenges, problems or losses did you deal with?
Requests. What top areas can your investors assist you with right now? List up to four items – you lose attention beyond that number. If one is more important than the others, bold it and explain its importance.
KPIs. Include the most important KPIs you are tracking in the executive summary.
A main update. This can either be in the attached document or in the email beneath the executive summary. Include:
KPIs. What were all your KPIs for the month and how did you perform?
Achievements. Expand on your achievements in each area: product, marketing, sales, HR, etc. Include no more than two bullet points for each domain (and if there are none, it’s fine). If you already included one of these KPIs in the executive summary, expand on it here.
Challenges. What were the main challenges you faced this month? This is an expansion on the lowlights section of the executive summary. It’s possible, also, that there are no more to include. But even small issues like ‘we have a problem recruiting experienced backend engineers’ will help keep investors updated (and give them easy assists).
Plans. Include a short description of what you plan to do next. Preferably also include your target KPIs for the next update.
The above points are must-haves in your update. The below are nice to have:
New Key Hires. Investors love to see new hires, especially senior people who joined the team. If you highlight new hires, include a brief bio and LinkedIn.
Notable Market News. This isn’t necessary in every update, but is nice to include occasionally if there’s big news. If a competitor raised a round, a new competitor emerged, or a larger company announced anything relevant this is the place to mention it. This will help your investors stay up-to-date if they’ve missed something. Alternatively, if they’ve already heard of this news – especially if it’s not positive – it’s good for them to see you are also aware and sharing.
Thanks. Not all Founders like to do this. But thanking your investors for their assistance in the previous month may get everyone to try harder.
Other stuff. Here you can mention anything else that feels relevant, but doesn’t fit into the above categories. Think: media mentions, personal updates, etc.
That’s the basic template. But there are still three stylistic and tonal notes that are important.
First: use data to tell your story. Graphs especially – visualized data always works best. General updates that lack data will feel incomplete at best, and like you are hiding something at worst.
Second: If you change your KPIs, product goals or anything tangible from one update to the next: be transparent about it. Call it out specifically. You’d be surprised how many investors “catch” Founders who are changing goals by checking earlier updates for consistency.
The third point is the natural companion to the second: Read your own previous updates. You are telling an ongoing story. Think of each update as a chapter. If you don’t read the previous chapter, how will you connect the dots for your readers?
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