Investor update, the tool to maintain the relationship with your investors

In today's article, we explain a strategic concept that every entrepreneur must master. We’re talking about a document that, if used well, can bring great benefits to your startup: the Investor Update.

This document can be really useful whether or not you currently have investors in your company. Don't miss this article and discover what it is, how to structure it, and why it is one of the best management decisions you can make.

What is an investor update?

Let’s start with the basics: the investor update is a brief report (between 1 and 2 pages) in which you explain where your startup stands. It’s sent periodically to investors so they can be updated with everything that is happening.

Through this document you can keep them informed, aligned and committed to your project. But don’t get the wrong idea: this isn’t an exclusive report for companies that have already raised funds.  If you don’t have investors for your initiative yet, preparing an investor update is also a highly recommended practice.

• Build relationships before asking for money. If you meet investors at an event, you can ask for permission to add them to your investor update list. This allows you to build a relationship with them ahead of future investment rounds.
• Demonstrate execution capability. If month after month they see that you deliver on your promises and show real progress through your metrics, you increase the chances of an investor becoming interested in getting involved in your project.
• Allows for internal reflection. In day-to-day operations, it's easy to lose focus on your company's progress. Preparing this type of report every month or quarter forces you to pause, evaluate your company's performance, and analyze which parts of your strategy work and which do not.
• Get strategic help. Investors don't just provide capital; they are also a network of contacts and knowledge. By transparently sharing the challenges you face, you can ask for specific assistance.

How to elaborate a good investor update?

However, to write an investor update that is truly useful, you need to include key elements and a specific structure. Let's start with its format. Think of this document as if it were a newsletter. It’s a report sent by email every month or quarter to investors with a quantitative and qualitative update on the status of your company. This means it should be short, clear, and concise.

Transparency and consistency are two other fundamental characteristics. That is, you cannot only highlight achievements; the challenges you have encountered must also appear. As for consistency, it means that every month must follow the same line; therefore, it’s best to work from a template. Likewise, once you have chosen the frequency with which you will send it, you must always stick to it.

That being said, we can move on to see what structure you should follow to make it work:

1. TL;DR (Too Long; Didn't Read). Always include a brief introduction at the beginning of the report that clearly summarizes how the month went, ideally between 1 and 3 lines that can be read in a few seconds. This way, recipients can tell at a glance whether it was a good or bad month/quarter.
2. The Good and the Bad. Next, list both the positive and negative highlights during that timeframe. We highlighted transparency as a key element at the start, so you must also share what didn't go as expected during this period.
3. Metrics and Results. Now it's time to display the data. Including charts and comparisons that reflect performance and financial results is key to supporting your report with objective data. But a company tracks many metrics, which ones should you include? Usually, these stand out:

• Performance Metrics. Gross Margin, Contribution Margin, Burn Rate (monthly spend), and Runway (remaining months of operational cash).
• Growth Metrics. MRR (Monthly Recurring Revenue), ARR (Annual Recurring Revenue), and Active User growth.
• Customer Unit Economics. CAC (Customer Acquisition Cost) and LTV (Customer Lifetime Value).

4. Plans. Outline your startup's next steps simply, detailing the goals you have set for the upcoming months.
5. CTA. End with a Call to Action, using the update to ask investors for support in specific areas and keep them engaged with your project.

To sum up, the investor update is the best tool for keeping your investors committed to your project.