Treat your Angels Right

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:

  1. Short qualitative paragraph from CEO describing the progress since last update
  2. High level financial and operational metrics for the business
  3. Highlights and lowlights, performance vs. plan and competition
  4. Key metrics for the coming year
  5. “Asks” for things investors can help with immediately in the business
  6. Cash position and any further fundraising plans
  7. Thank for continued support, recognize any particular instances of investor assistance over last year to role model behavior for other investors
Simple, quick, and to the point.
Some startups also do a periodic update for all “stakeholders” in the business.  This would be a short update that was a little more qualitative, slightly more promotional, and with somewhat less confidential data.  For this recipient list, you might use mailchimp or another list solution, allowing easy unsubscribe.  Make the list include your investors, people who considered investment, possible next-round investors, advisors, key influencers, fans, friendly bloggers, etc.  On an annual or semi-annual basis, people appreciate a non-intrusive update, and again you have an opportunity throw out your “asks” and leverage the help possible in this entire community.
Nurture those angel investor relationships: if you make money for them, you can treat them like dirt and they won’t mind a bit… but you’re going to be glad you invested the time if things don’t go seamlessly into orbit (and they rarely do.)


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Written by Josh Hannah
Josh Hannah joined Matrix Partners after a career as a serial entrepreneur (Betfair, eHow, wikiHow.) Read more about Josh.
  • Benjamin Yoskovitz

    I’m a big fan of regular updates, although wasn’t as vigilant as a founder. As a Founding Partner at an accelerator (Year One Labs) we encouraged the companies to do weekly updates with investors and mentors. Perhaps more than necessary as companies “graduate out and scale” but the updates were very well received and worthwhile (and still are) –

  • Jack Gavigan

    Great post. Should be required reading for anyone taking angel investment. 

    I’d add one piece of advice for CEOs – when you’re courting an angel, find out, up front, before the deal is sealed, what his/her expectations are. Of course, the flipside of that coin applies to angels – make sure, before you hand money over, that the founders are crystal clear on what your expectations are.

  • Michael Kokernak

    Angel investors are the first “customers” of start ups.  It is absolutely critical that the CEO treat angels as their first customers.  Even asking them to demo products, review slide decks, and maybe even review resumes of potential hires.  I am amazed how many early stage companies don’t do this naturally….it should come naturally.  It will make all the difference in the world whether the company will succeed or fail.  Excellent post.  I forwarded it to all my potential angels and all the people working on my current project.  After all pending “employees” are also risking their capital and they should be treated like angels. 

    Most angels don’t invest for the money..they invest for the thrill of being involved. Cut them off at the legs and they will never forget.

  • Timothy Bernard Jones

    Great post. I’ve had angels who’ve been a part of our team since inception. I just finished an annual letter, so good to see Josh supporting that communication medium.

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