Having worked with lots of Angel investors who have invested in startups, there is one running theme about what pisses them off.
It’s not the fact that you haven’t quite hit the targets you set out in a business plan. Experienced angel investors understand that the business plan is a work of fiction and rarely bares any resemblance to reality, although they all want to see you produce one. It’s not the fact that you are taking longer to launch than you planned. Or that you haven’t hired the people you said you were going to hire. All those things are important, but they’re not the things that piss investors off the most.
The thing that pisses them off the most is poor or non-existent communications from their startups.
I quote from an Angel investor:
“The only time I hear from StartupX is when they want me to sign something or they want more money. They just call up all friendly and end the call with, “Oh yeah we are about to run out of money, can we have another £50k?” The answer is “I haven’t heard from you in months, so why on earth would I give you another £50k?!”
Or the investors find out via LinkedIn that FounderX took a job. Or worst of all, they read on TechCrunch that StartupX just closed an investment round that they weren’t invited to and legally should have been.
These types of things happen every day with bad startups. Investor communications is one of the most important jobs a CEO can do. You want sticky customers for your startup and you want sticky investors who come back for more. Your seed round money runs out a lot faster than you think, therefore you are going to be knocking on the door of investors before you know it. And if you haven’t done any startup investor reporting, then you’re going to be locked out.
Why don’t startup CEOs send out investor reports?
– They didn’t know they needed to send an investor report.
– They have never been told or shown what to put into an investor report. Actually there are not many examples on the internet of good investor reports. So rather than get it wrong they just don’t send any.
– It takes too long to gather the information. They believe the few hours it would take to get the information for the report is better spent working on the business.
– They think investors only want to hear good news so they are waiting until they have some.
Why should you send out investor reports?
– Its what professional CEOs do. (You want to be seen as professional right?)
– Investors can help but only if they know what’s going on. Sharing your current challenges allows the investors to help and mobilise their network. You wanted smart money, that’s why you went for these investors – so use them by empowering them with information.
– You want more money. Either you are heading to an A investment round or you need a top up seed round to get you to the next milestone. You will want to go back to your existing investors as a first port of call; in fact you almost certainly have to under your current shareholders agreement terms. If you haven’t communicated with them in a year, then they are going to be lukewarm at best. Raising follow-on money from existing lukewarm investors is painful and embarrassing.
– It will make your investment raise quicker. Happy investors bring other investors to the party.
Report monthly to your investors and include the following:
– Summary of month’s activity (write a narrative)
– Financial figures (cash in, cash out, burn rate, days to cash zero)
– HR Changes (hires & fires)
– KPIs (report all relevant KPIs – unique visitors, downloads, monthly active users, monthly recurring revenue)
– Challenges (list your current challenges and invite help)
There are a few tools out on the market that help you do the above simply and consistently and they are highly recommended.
At Oxygen we get all our startups using the Seederboard investor reporting tool which integrates with Xero to pull in financial data and allows you to set up graphs for each of your KPIs and track them against agreed targets. Seederboard works well for Angel investors as well because they can view all their monthly reports in one place in a similar format, rather than searching through email every time to find a report.
Most of these reporting tools are a reasonable price per month.
If it keeps your investors happy and they come back in on your next round, it will be the best investment you ever made.
Read more: 10 tips for raising startup investment