Investing in a startup is easy, but getting positive returns (hopefully money-over-money) is damn near impossible. At the early pre-seed or seed stage, we are betting that whatever a founder is planning will take 12–18 months to accomplish, and 3–6 months to raise their next round during that time as well. But once we make the investment, what happens, and what can we do?
Unless you are the lead investor and take a board seat, or are strategic enough to be an observer, you actually know very little until you need to know. We generally expect a company update every month or quarter from a founder, laying out the good, bad, and ugly. This is where my analogy of the old Polaroid camera comes from; we get a snapshot of the company, and try to help based on that.
We obviously want to help our startups be successful, but it’s hard to do when you’re obviously not day-to-day. Imagine being a founder, sending out an update, and every individual investor or angel wants to meet, or chat to get a more in-depth overview of what’s going on. A lot of what’s in the update are things that have taken months to plan, execute, and refine, generally something that a somewhat casual conversation won’t help, and something you might learn you can’t contribute to.
Until you have about 10 investments, there really isn’t much you need to manage unless a specific request comes your way. In the same fashion that I see first time founders get all excited then realize there isn’t much to do at the start, the same thing happens to first time investors as well. Unfortunately, this can then lead to ‘angel exhaustion’ because they made a few investments then just wait, as it takes years, if you’re lucky, to get an exit or, most likely, a write off.
Having now invested in over 10 startups and managing another dozen, here is what I’ve learned about updates:
- Make them timely and consistent so that your investors know when to expect them. If we don’t receive them, we generally assume something is wrong, which is when we want to help even more by unfortunately emailing you to ask for an update.
- Develop your own rapport and voice. Make sure it’s professional, and covers all of the business aspects from views, rev, partnerships, sales, hires, and future objectives. We always like to know what you’re thinking and why.
- Calls to action are great. This is probably one of the most important things that give investors things to do. For example, you need intros to prospective clients, service providers, investors, etc.; or, you need strategy help ora sounding board for new ideas. We are literally paid to help you, so let us know exactly what you need.
- Be honest and open. Startups are hard and generally don’t go the way you expect them to — we expect most to pivot a little within the first year. Just don’t try to make a bad situation sound positive and optimistic, when you can admit you were wrong, made a mistake, and need help.
- Give kudos to those that helped you. This is a form of gratitude mixed with a little ego as everyone wants to be acknowledged for their work. It also makes other investors a little jealous and may motivate them to try harder or get to know other investors better for future collaborations.
- Make it easy for us. You’re day-to-day in the trenches, while we have other investments and things to deal with, so you might have to do a little of the initial grunt work. Go through our Linkedin for connections we didn’t know we had, write an email that we can forward, or send us hires you’re looking for.
While the updates are great for us, it’s also very beneficial to always benchmark and quantify where your business currently stands. We love to see the progress over time and connect the dots to see what works. That way, we can learn from the experience and apply it to other investments we make.
