Investor Updates

At YC, we get lots of updates from our alums. There seems to be a correlation between quality and frequency of updates and the goodness of the company and founders. I strongly doubt there's a causal relationship, but I do think it makes sense that the best founders would write good and frequent updates because it reflects their own processes and attention to metrics and consistent growth.

While the act of sending updates is itself valuable, the quality of the update is critical. Writing a good update forces a founder to focus on the right things and keeps your investors engaged and helping.[1] A bad update can reflect the fact that a founder is thinking about the wrong things. When an update is just poorly executed, it doesn't get read, which removes a lot of the value, i.e., getting your investors engaged and staying at the top of their minds when relevant opportunities arise..

Here are some of the most common pieces of advice I give when I see updates that could be improved:

  • Figure out what you're going to report each month - this should probably be your growth (in revenue or users)[2], your cash/burn, what you need from investors and a qualitative measure of how things are going. As your business matures, these metrics may grow and shift, but stay consistent.[3]
  • Send updates monthly. It's a hell of a forcing function, a bit like writing ¬†your growth on the whiteboard every month for everyone to see.
  • Lead with the key metrics and growth rates you defined.
  • Make requests of your investors after you report your key metrics. You could just as easily lead with this.[4]
  • Put the asks higher up so that the investors defintely see them. Key metrics and asks should be front and center to improve your hit rate.
  • Make it shorter. You want your investors to read the whole update and remember what they can do to help, and why they should do it.[5]
  • Charts are nice. They're hugely effective at showing progress in a way words can't.
  • When you finish an update, go back and read it. Does it have relevant data? Does it have your asks? Is it short? If not, rewrite it.

If you hit those points, you're probably all set.It doesn't matter if the update is in a fancy newsletter template or in a plain text email. The act of thinking about it and sending it is what is important, so just get in the habit.

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[1] If your investors think about you positively and frequently, they'll not only help you with specific requests but point serendipitous opportunities your way. That's one way you can "manufacture" luck.

[2] Avoid using "proxy metrics" without the necessary context. For instance, if you report GMV as your core metric, you should report your rake and action revenues. Otherwise, your investors are going to immediately wonder what's going on.

[3] Adding new things because they're important is good. Removing things because you can't hit your milestones is bad.

[4] Pretty sure this is how Chris Dixon advised me to write them.

[5] This can get hard when you have lots of good things to say. If you must include them, put it in an appendix or save it for quarterly or semi-annual updates.