How Do You Communicate With Your Investors?

At each stage of growth, startups must communicate effectively with their investors. Achieving this requires implementing reports highlighting key metrics, demonstrating the value created and how it translates into the venture's growth.

In a previous post, we discussed the importance of maintaining effective communication with your investors as a key element to driving the growth and success of your startup. In this post, we want to share some important elements you should include in your communication with them and how to adapt the reports to each stage of your startup, ensuring continuous support from your investors, which is crucial for growth and expansion into competitive markets. In this writing, we detail the relevance of these deliverables and provide examples of how to put them into practice.

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Idea Stage

This reporting stage involves the qualitative aspects of the startup, where the venture is focused on finding product-market fit. At this stage, reports should share information about validating the product and discovering customers and must include details about the first customers willing to pay for the product or service.

Since there are still no recurring sales, the idea is to keep investors (family, friends, and fools) updated on the progress and challenges encountered, how they are being resolved, and if any support is needed to advance. This can be shared as follows:

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Hello [Name],

Greeting (optional)

Learnings:

Last week, we obtained 5 new customers (describe them and include recurrence if applicable: monthly, one-time payment) [at this stage, the startup is still validating the model, so there may be changes in revenue recurrence].

We also encountered some challenges, detailed below:

• Customer acquisition: The sales process is longer than expected for the ticket price (describe).
• Retention: Customers are unsubscribing after completing the trial period due to difficulties using the product/service (elaborate).

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This report should show how the team is deepening their market knowledge, using these learnings to improve the value proposition. With this information, investors have a broad view of the team's execution capabilities and the startup's development since this is a stage where the goal is to accelerate the learning process. One method the team can apply is the well-known Lean Startup, "which teaches you how to manage and steer a startup, when to pivot and when to persevere, and how to grow a business with maximum acceleration." You can delve into the method here.

The idea at this stage is to accelerate market learning to iterate and fit the product or service quickly into the market. Weekly reporting is recommended.

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Pre-seed and Seed Stage

In these stages, reports start to show traction and demonstrate the product's scalability, market adoption, and growth projection. Here, the team begins to demonstrate execution capability and the startup's direction concerning the business model. Changes to the model may still occur at this stage, but a clear path to growth starts to emerge.

To maintain communication with investors, the startup should integrate metrics into their reports that highlight product traction and how it is reflected in the numbers, such as:

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Hello [Name],

Greeting (optional)

Highlights:

• Retention: We haven't had churn, but we've found that customers prefer contact with a person over using the automated inquiry system. We are seeking a solution as this prevents us from scaling.
• Customer acquisition: Word of mouth is working very well thanks to the referral program. We will continue this strategy.

Lowlights:

• Software development: Progressing towards milestone XX.

Revenue Metrics:

Retention Metrics:

Financial Metrics:

These metrics should be accompanied by an explanation, detailing why changes occurred and the potential reasons for them.

Support Needed:

We need more introductions to potential customers. Please send any suggestions to xxx@xxx.com

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Besides these metrics, it is also valuable to share the strategies used to attract customers, providing an understanding of the go-to-market strategy in practice. As well as the follow-up on set milestones and how challenges are being tackled to achieve them. Monthly reporting is recommended.

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Growth-Expansion Stage (Series A, B, C…)

From this stage on, the relationship with investors focuses on sharing progress and strategies on how to scale the product or service. For this, the startup should share relevant internal information as well as metrics that allow monitoring of these plans.

For example:

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Summary of Achievements:

[Detail the most relevant accomplishments and divide them into Highlights and Lowlights.]

• Software development: Detail the most relevant progress.
• Hiring: Detail the most relevant progress.
• Participation in events: Detail the most relevant progress.
• Etc.

Performance Metrics:

Revenue:

• Annual Recurring Revenue (ARR)
• Monthly Recurring Revenue (MRR)
• Growth % YoY
• Gross Merchandise Volume (GMV)
• Take rate %
• Revenue
• Annual Contract Value (ACV)

Customers and Retention:

• Total Customers
• New Customers
• Burn Rate
• Retention
• Net Revenue Retention (NRR)
• Net Promoter Score (NPS)

Unit Economics:

• Lifetime Value (LTV)
• Customer Acquisition Cost (CAC)
• LTV / CAC ratio
• CAC payback

Team:

Capital Efficiency Metrics:

• ARR per employee
• Burn multiple
• Cash conversion score

Financial Metrics:

• Cash in hand
• Burn rate
• Runway

According to the startup model, some metrics may be created to measure the model's impact, while others may not apply. Understanding how you will measure your startup's progress is also important from day one.

Remember that these metrics should be accompanied by explanations, detailing why changes occurred and the potential reasons for them.

Ask for Help:

Where the investor can contribute: connections, references, advisors, etc.

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In this growth stage, quarterly reporting is recommended plus quarterly financial statements attached to the report. Additionally, building the startup’s teams according to the needs of each stage should be reflected in the achieved milestones and, consequently, in the results.

In summary, this type of transparent, data-driven communication strengthens the relationship with investors by demonstrating competent, results-oriented management that measures execution and shares relevant information in an organized and timely manner. As the startup grows,  it's crucial to communicate not only the increase in users and customers but also how this growth is backed by scalable infrastructure and strategic processes.

Incorporating these key aspects into investor reports according to the startup's growth stage ensures effective communication, strengthening the relationship with investors, and aligning their expectations with the company's achievements and challenges. Maintaining strategic transparency and demonstrating effective management are the foundations for building a successful and sustainable company, including all those who are part of the process.