Raising funds is a major milestone in the history of every startup, and you should congratulate yourself for doing this successfully – after all, only a very small percentage of founders manage to get to this stage. After you’ve patted yourself on your back, accepted the congratulations which pour in, and issued the press releases to let the world know that you are on your path to building a world-class company, you then need to then get down to brass tacks.
The problem is that after founders get their first cheque, they’re so focused on fine-tuning their product and marketing it, that they forget that they also need to take care of their investors.
Here’s a simple solution – make sure you send a monthly email to all your investors on a regular basis, updating them as to what’s happening to the company.
You can use a basic template that covers all the major areas – product updates; hires and fires; revenue and cash burn; your plans for the next months; and what help you need from your investors. Lots of the headings will be blank, and that’s fine too.
Talk about both the highlights and lowlights, and don’t gloss over problems. This is stuff which you live and breathe on a daily basis, so you won’t need much time to do this – all you require is discipline! Not sure what to put in and what to leave out? The rule is simple – more is better, so overcommunicate, rather than censor. It won’t take your investors much time to read through your email, and they can always skip the stuff they aren’t interested in.
You could start off by saying, “I’m really excited to have all of you as our partners on this journey and I’d like to share information with you on a regular basis. Could you please give me permission to do so?” And then you should send them the email every Sunday. Providing regular updates is part of your shareholder agreement (SHA) in any case, but doing more than is required is a great way of standing out!
Are you scared that this will consume a lot of your time? It really shouldn’t. It’s just a question of compiling the information you already have at your fingertips on a regular basis. This is the Open Management concept, where the founder has a dashboard that they use to track the pulse of his business and shares with all his employees – you just need to share this with your investors. The weekly report only contains the key operating numbers – the tactics, insights, and strategy will be reserved for the monthly MIS.
Will your investors get worried and lose faith in you when you describe the fires you are having to put out? No – we know you will run into problems and would like to know how you plan to deal with them before they become unmanageable. Will they want to start micromanaging you? Again, this is unlikely – we have enough on our plates already, and are quite happy to give you the freedom to run your company, if you can show us that you are doing a good job!
This kind of regular contact is good for your investors because it will help them to trust you. It will show them that you are open and transparent, and are behaving like a real partner. This exercise demonstrates that you don’t just want their money – that you also value their expertise and feedback. The benefit is that the next time you do run into trouble (and I promise you that you will!), they’ll be much more inclined to help you as compared to the other founders that they have given money to because you’re going to stand out.
You should do this not just for the sake of the investors, but for yourself as well. The right time to fill your bucket with goodwill is when you don’t need to – when things are going well. Sharing updates regularly is a sign of respect, and by keeping them in the loop, it’s much easier for you to ask for additional assistance when you need this. You’ll be surprised how helpful investors can be if you adopt this approach, rather than run to them for help only when you run into problems.
This is also a great way of stepping back on a regular basis, so you get an overview of how your company’s doing – you will get a 30000-foot perspective as to how you are evolving. It’ll help you to stay on track and remain grounded so that you can no longer fool yourself about your failure to deliver what you originally promised ( and I can promise you that there will be hiccups along the way!).
And on a personal note, it will be fun to share your journal with your grandchildren when you finally become a millionaire.