How to write a great investor update
One of my portfolio CEOs recently asked me for some examples of a great investor update newsletter and I thought that was a good opportunity to articulate the key components of a great investor update.
Why even bother writing a monthly newsletter?
I mean we're busy operating our business getting s*** done, selling to customers, building product; do I really need to spend time communicating with people who may or may not even be paying attention? YES! The answer is yes absolutely. An investor newsletter is one of the most scaled ways to communicate with your stakeholders. It is also an opportunity for you to reflect on the month that has passed, ask for help and provide signposts for what folks should expect in the coming months and quarters. A lot of investing is about connecting the dots on an entrepreneur, industry and business. Having a regular newsletter provides more intermediate data points for investors to anchor their thoughts about you your team and your business around rather than only seeing you when you're in the middle of a fundraising process. In our own business we write a monthly note to our Limited Partners (LPs) and we also include those who have indicated an interest in investing as part of that distribution. This has enabled us to build relationships with potential investors who were not part of Fund 1, but who are now committed to Fund 2.
Is the business going well? How do we know?
The first question any investor has is “How is the business doing?” A common mistake here is a vomiting of facts and details which are very challenging for an investor (or any reader!) to put together. A more useful way to present this information instead is to articulate the key metrics of your business e.g. customer acquisition costs, average order volume, time to a transaction and describe the progress and initiatives you have made on improving each key driver since the last update.
For example let's say you run a lemonade stand. You might say to investors:
The two big initiatives we're working on this quarter are (1) Reducing our customer acquisition cost as well as (2) Driving down the cost of producing each cup of lemonade. On the marketing front we signed partnerships with Pat's Schoolhouse, the New York Marathon and Facebook Singapore driving the average cost of customer acquisition per cup of lemonade from $0.10 to $0.07. On the cost side our new process improvements have reduced the cost of a cup of lemonade from $0.05 to $0.03. Our next big step up will be when we exceed 10,000 cups per day (currently at 8000 cups/day) where it will make sense to invest in an automatic lemon squeezer which can help us drive costs down even further to $0.02 per cup.
This is a good place to insert a few charts to show these key drivers over the last six months or year if you have the information so that people can get a sense of trajectory
2. How is the team doing? Do you have the right people in place?
Next it’s helpful to talk about how the team is doing. Here is where you can cover personnel issues, open positions, any challenges you might be facing on the organisational front. Highlight any new hires that you might have made since your last update.
We're very excited to welcome Lindsey Irwin the most recent winner of the World Lemonade Championships as our brand ambassador. She'll be working with our Partnerships team to raise the visibility of Panda Lemonade in Southeast Asia. Two open roles we are currently struggling to fill include include a Process automation engineer and Citrus supply chain expert. If you have any folks in your network who might be a good fit please send them our way. (don’t forget to link to job descriptions)
3. Ways you can help
Finally make your investors do some work for you! Ask them for concrete things that you might need help with.
Given the success of our partnership with the New York Marathon we've decided to make a big push into partnering with other races on race day for lemonade distribution if anyone has contacts with the San Francisco marathon, the Ironman Triathlon group and Extreme Backcountry racing please let me know. We're starting to build out our sales team. I would like to talk with folks who have scaled sales teams from 0 to 10 to help me better understand what a great sales leader and what a great initial set of salespeople looks like for a business like ours.
4.Bonus material
Other things that you can consider including as appropriate:
Learnings about your industry, competitors etc
Small personal details to give your newsletter a little personality (one portfolio company shared their CTO’s engagement; my partner Eric often includes photos of us or the kids depending on where in the world we are
Thanking those who’ve helped you in the past month!
Happy writing!!!