Treat your Angels RightFollow @jdh
Before joining Matrix, I’ve had some experience with seed investors — I had a dozen or so of them at Betfair (Flutter), my first company, and then made a number of investments myself when my entrepreneurial investments began to bear fruit. The following advice comes out of my experience, and while I was not terrible at it, I can’t claim I did this perfectly as a founder — you learn from what you do wrong as well as right.
Seed investors generally have little information rights, and that’s as it should be — as CEO you shouldn’t be spending a bunch of time updating these guys. However, I’d argue it’s in your best interest to make at least a minimum of effort in communicating with your early supporters. You should do this on a regular basis, whether the news is good or bad.
The benefits of this:
- First and foremost, it’s the right thing to do: these angels bet on you with their hard earned cash, and generally only hold you to a standard of doing your best to make it work — they’ll understand if you try hard and fail. The least you could do is reward them with some psychic satisfaction via engagement with the progress of their bet
- It’s a leveraged activity: you can write one update for everybody. By preempting inbound inquiries, you can write once for all rather than communicate bilaterally when the questions come in
- If your business doesn’t become Facebook (or even Betfair!), these early supporters will be important to your future career. They will serve as potential future backers, and their endorsement will be critical to demonstrating your worth in the absence of financial returns from your current company
- If your business goes sideways and you need incremental cash, your investors will be more likely to offer additional support if the request for cash isn’t the first they’ve heard from you since the original check
- Most of these angels are well-connected, successful tech people — if you include “asks” in your update, you might be surprised the help you can get. This could be introductions to a customer or partner, candidates for open job recs, or just promoting your product or service through their personal networks.
Now, if you’re not a early-stage CEO, you probably read this and think, “duh, this is obvious. what moron wouldn’t do it.” But if you are an early-stage CEO, you’re probably thinking, “yeah, I really should do that, have been meaning to but haven’t done in for the last 18 months”. In my personal experience, a bit over half of the companies I have seed/angel invested in communicate proactively with me less than once a year. As a founder, you have to make it a priority, and just bound the time you’re willing to put into it — I’ll spend 90 minutes writing an email and sending it, and then get back to my other work.
I have seen a number of formats for this. The most common is a 1-page email sent once a year, and I think this is fine and sufficient. Mariam Naficy of Minted is a great example of this. Some do a bit more — Ross Weber of Dealbase sends out a 1-page update quarterly, and this definitely keeps the company top of mind for me. Before being acquired, Max Ventilla of Aardvark would organize half-day summits with his angels to work through strategic issues. Any of these meet the minimum standard.
A basic format for your update would be:
- Short qualitative paragraph from CEO describing the progress since last update
- High level financial and operational metrics for the business
- Highlights and lowlights, performance vs. plan and competition
- Key metrics for the coming year
- “Asks” for things investors can help with immediately in the business
- Cash position and any further fundraising plans
- Thank for continued support, recognize any particular instances of investor assistance over last year to role model behavior for other investors