The Importance of Reports for Investors

One of the most determining factors for the success of a startup is the discipline of the entrepreneurial team. Not for nothing did Bill Aulet, an entrepreneurship professor at MIT, title one of his most recognized books “Disciplined Entrepreneurship”. In my experience, one of the best indicators of an entrepreneur's discipline is the reports they periodically send to their investors. In fact, one of the practices I always recommend to entrepreneurs is to start sending their reports even before receiving their first investment.

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Why dedicate time to reporting when there are so many other priorities in a startup?

There are many reasons why the habit of reporting is important:

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In first place, the habit of reporting compels the CEO to measure and analyze the main variables of the startup. Echoing Lord Kelvin's words, "What is not measured, cannot be improved." Entrepreneurs are often extremely busy with day-to-day tasks and find it challenging to allocate time to measure and analyze if they are moving in the right direction. Many problems can be prevented if identified early, as burying one's head in the sand like an ostrich usually ends badly.

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In second place, Reports are the main channel of communication with investors, serving as the best way to stay on their minds, whether it’s for support, advice, or creating valuable connections. One recommended section to include in the reports is the “ASK”, where entrepreneurs specify their needs for support or queries. You would be surprised by the amount of support you can receive from both current and potential investors.

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In third place, Many investors prefer to better understand the entrepreneur and their startup before deciding to invest. Receiving regular reports helps build that knowledge and trust, increasing the likelihood that potential investors will decide to invest in the future.

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In fourth place, reports are a way to build trust, both with current investors in the startup and potential investors. Receiving regular information fosters trust and demonstrates transparency, regardless of whether the news is good or bad. The absence of information always generates distrust and indicates a lack of discipline.

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In summary, the discipline of reporting regularly provides greater clarity on the startup's situation, enabling better decision-making, and increases the chances of receiving help and investment.

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¿How to Create a Good Report Without Overhelming Yourself?

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One of the main excuses entrepreneurs have for not sending regular reports is the lack of time. We know that entrepreneurs, especially in the early stages of their startup, have many fronts to attend to and time is one of their scarcest resources. For that reason, here are some tips to help you manage without being overwhelmed:

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First, ave financial and metric information well-organized, ideally through automated dashboards to enable quicker report generation.  Tools like Chartmogul are great for accessing real-time metric information. Another option could be Baremetrics. Alternatives include having an ERP system, or creating a dashboard that pulls information from the backend, with Looker Studio also being suitable for this purpose.

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Second, the depth of the reports will depend on the stage of your startup. Reports will expand in length and information as the startup grows and has more resources. In the initial stages, where the main goal is rapid learning, one or two paragraphs explaining the week's experiments and learnings might suffice.

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In an upcoming installment, we will share report templates that you can use to incorporate this practice. Stay connected!

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¹ https://www.d-eship.com/