The Why and How Of Updating Your Angel Investors

By Dharmesh Shah on May 20, 2013

There’s a massive amount available on the interwebs on how to improve the odds for success in new ventures. But almost nothing concrete is available on the care and feeding of your investors. You can do all of the Lean Startup experimentation you want, but we’re here to tell you that one of the the easiest and most underrated skills that a startup CEO needs is knowing how to keep your investors updated, excited and engaged.good news bad news small

The reason is:  The CEO is the investor's  user interface into the business.  It's how investors see what's going on, and in some minimal ways, interact with the business.

We polled several early stage investors (including ourselves) that have 30+ investments each under their belts, and asked them their advice for entrepreneurs on how best to communicate with them and update them on the business. Here are the results.

1) Write your investors consistently. probably every 1-2 months (if you're early stage), and every 2-3 months if you're a bit further along. If you have a regular advisory board or board of directors meetings, that's a good time to send out an update. This is preferable to phone calls, both for you and for them. If you’re smart, you’ll send this letter out, in more or less similar form, not only to your investors but also to mentors, advisors and staff. And if you do ever follow up with calls, they’ll be up to speed and more productive.

2) Keep it short. 2 pages, max. Your investors want to know what’s going on, but they don’t need to hear every detail.

3) Use a template. We like the TechStars one. Katie Rae and Reed Sturtevant of TechStars Boston teach their companies to communicate with mentors in a way such that each letter builds on the previous one. Typically, the letter gives both highlights and low-lights since the previous communication, sets some short term goals, and then reviews the progress—or lack thereof—on the goals set earlier. Just knowing that you will be producing a report card helps focus you on the important stuff and ensures that things don’t get forgotten. Check out the investor update template for a sample.

4) Remind them what you're doing (now).  I know this is going to sound strange, but often your investors are not doing as good a job as they could keeping up with all your activities, news, tweets and pivots.  Always include a one sentence description of what you're doing (now) just as a friendly reminder.  A side benefit to this is that it forces you to write (and read) your one sentence description.  This is one of the hardest tasks in startup-land.

5) Tell them the one or two strategic problems you are wrestling with. Got a few hard decisions? You’d be surprised how quickly an investor will respond. And odds are pretty good that they’ve seen this movie before and can help you come to a better decision. If it’s personnel-related, though, you may wish to be more circumspect.

6) Keep it honest, but don’t tell your secrets. Would you be comfortable if this email ended up in public, or in the hands of your competitors? If not, consider editing it down.

7) Always have 1-3 direct asks. Looking for some specific introductions? Ask. Need to source some key personnel? Ask. Want them to share some important news on their social media networks?  Don’t be proud, don’t be shy, just ask. 90% of the time, the investor will probably not be able to help, but in the 10% of the time they can help, it's often pure gold.

8) Cast a wide net, but bcc. The more people you can keep up on your company, the more likely it is someone will be able to help you out, and the more you can leverage your network. But respect your investors’ privacy, and make sure you are not revealing any confidences in the letter. (I still screw this up—when in doubt, leave it out.) One idea would be to setup a simple mailing list so you're not trying to type in email addresses manually every time.

9) ARCHIVE all correspondence in a shared folder. Your investors will be grateful that they don’t have to be organized. This tip is so simple, yet almost no one does this. Your investors have more on their plate than just you. Make it easy on them by putting everything they need to see into one folder which they can reference. Send each letter by email (don’t make them have to hit links or print out attachments,) but include a link to the shared folder with the full archive. Inside, have all of your historic correspondence, and perhaps even your latest pitch deck, any financials you want them to see, etc. You might consider having two separate folders—one complete one, for the inner circle, and one that’s been redacted down for the broader crowd.

Startups fail for lots of reasons— but one of the most common one is that they run out of money. Informed investors are generally happier investors—and at a minimum more capable of helping. And, if you're out raising another round sometime, chances are, your angel investors are the one's that can help make intros. It's easier for them to do that if they hear from you more often than once every 12-18 months when you need some paperwork signed.

Remember, this exercise is as much for you as it is for them.  

This entire process should take you less than an hour or two a month and it's worth it. Besides, if you do it right, you'll actually find that it helps you to write these updates -- and it's not a complete waste of time.  

This article was a collaboration between Ty Danco and Dharmesh Shah. Ty is CEO/co-founder of BuysideFX and an angel investor/mentor (you should be reading his blog). Dharmesh is founder/CTO of HubSpot, runs OnStartups.com and is an angel investor in over 40 companies (you can follow him on twitter @dharmesh).

Continue Reading

Startup PR Tip: To Get Press, Don't Pitch Your Product

By Dharmesh Shah on May 16, 2013

Entrepreneurs that are looking to get attention from bloggers and journalists will often pitch their businesses themselves or though a PR agency.

It's sad that most of those pitches fall flat and are likely to be completely ignored. A waste of time and money for everyone.product pitch small

For example, here’s a pitch from a PR professional. I’ve changed it slightly to avoid embarrassing anyone:

“I’m working with a wonderful new business… The owners grew up together and decided to go into business… it’s a story I’m sure your readers will care a lot about!”

Uh, no. It's unlikely that people are going to care about this story.

Don’t get me wrong. I’m sure the entrepreneurs are great people, but many entrepreneurs can tell a tale of struggle and euphoria and heartbreak and someday, against all odds, turning their dreams into reality and making their business a success. While occasionally readers might be inspired or motivated, for the most part we’re just not that interested in other people’s stories. Unless those stories are particularly remarkable we're more apt to just keep living our own dreams and writing our own stories. So, the things we're interested in is not other people's stories, but information that helps us write our own.

So what should you do if you’re trying to spread the word about new products and services, landing new customers, bringing investors onboard… all the stuff you hire PR agencies to do for you or, more likely, try to do on your own?

If you’re looking for press, forget the formulaic, cookbook approach to crafting a winning media pitch. That approach may result in coverage in a few outlets… but not the ones you really want.

Quick rule of thumb: Any media outlet that will do a story based on a crappy pitch is a media outlet that will get you crappy exposure.

Let’s pretend you’re thinking about pitching me an article idea for OnStartups.com (which has a modestly sized, but awesome audience).  You can apply the following to any media outlet or blog, though.

Here’s what to do and not to do:

Don’t tell me your story is unique.

No offense, but it really isn’t. There are thousands of Ramen noodle stories. There are thousands of 3 am “Eureka!” stories. There are thousands of maxed-out credit cards, relatives won’t return your calls, last-minute financing savior stories.

Your story is deservedly fascinating to you because you lived it (just as my story is fascinating to me), but to the average reader your story sounds a lot like every other entrepreneur’s story. Claiming your story is unique creates an expectation that, if not met, negatively impacts the rest of your pitch.

And if your story truly is unique, I’ll know. You won’t have to tell me.

Don’t tell me how much a little publicity will help you.

Never waste time by explaining how this could be a win-win relationship or, worse, by claiming you want to share your wisdom because you simply want to help others.

I know you want publicity, and I know why. I get it. I've been there. We’re cool.

Know what I’ve done recently.

It’s easy to think, “Hey, he recently wrote about choosing a co-founder, so I should pitch a story about how I help people find co-founders”

Um, probably not. If just wrote about co-founders. I’m probably good for a little bit on that topic. Never assume one article indicates an abiding fascination with a particular topic.

But do feel free to pitch if you aren’t a member of the choir I just preached to. Different points of view catch my attention; same thing, different day does not.

Know my interests.

You certainly don’t need to know I enjoy late-night walks on the beach. (Hey, who doesn’t?) But skim a few posts and you’ll know I have a soft spot for company culture, startup funding and startup marketing

So if you really want to get my attention, don’t use the tried-but-in-no-way-true “mention you really enjoyed something recent the writer wrote” approach.

Instead put your effort into finding an angle that may appeal to my interests. If you can’t be bothered to do that you’ll never get the publicity you want.

Forget a profile piece.

Straight profile pieces that tell the story of a business are boring. (At least I think so, which is why I don't post those)

The best articles let readers learn from your experience, your mistakes, and your knowledge. Always focus on benefiting readers: When you do, your company gets to bask in the reflected PR glow.

So,readers don’t want to know what you do; they want to know what you know. If you started a company, share five things you learned about landing financing. If you developed a product, share four mistakes you made early on. If you entered a new market, share three strategies you used to steal market share from competitors.

And while you may think the “5 steps to” or “4 ways to” approach is overdone, keep in mind readers love them… and even if I decide not to frame the story that way, developing mental bullet points ahead of time is a great way to organize your information (which helps me) and ensure you have great talking points (which definitely helps you.)

Realize that the more you feel you need to say… the less you really have to say.

Some people think bloggers are lazy and look for stories that write themselves. I can’t argue with the lazy part, but I really don’t want to read a 1,000-word pitch with a comprehensive overview of the topic and a list of semi-relevant statistics. The best products can be described in a few sentences, and so can the best pitches:

So now let’s get specific. Pretend you’re crafting your pitch:

Remember: forget what you want.

Many people think, “Wow, it would be awesome if OnStartups.com ran a story about our new product—think of the exposure! So many VCs would read it! We're looking for funding!"

Maybe so, but unless you focus on how readers can benefit from the story (learning about your new product isn’t a benefit to readers), that’s not going to happen.

Then, think about what I want.

I want to inform and occasionally – hopefully – entertain readers; the more you can help me accomplish that goal, the more interested I am in what you have to say.

Then craft your pitch with publicity as a secondary goal.

In the example above, the PR pro didn’t offer readers anything. His only focus was on getting publicity to benefit his clients.

Flip it around and focus solely on how you can benefit readers. When you do, your company will benefit by extension.

For example, if you want to spread the word about:

· New products or services: Share four lessons learned during the product development process; describe three ways you listened to customers and determined how to better meet their needs; explain the steps involved in manufacturing products overseas, especially including what you did wrong.

· Landing a major customer: Describe how you changed your sales process to allow you to compete with heavy hitters in your industry; share three stories about major sales that got away and what you learned from failing to reel them in; detail the steps you took to quickly ramp up capacity while ensuring current customers needs were still met.

· Bringing in key investors: Explain how you helped investors embrace your vision for the company; describe four key provisions that create the foundation for a solid partnership agreement; share the stories of three pitches to VCs that went horribly wrong and how those experiences helped you shape a winning pitch.

Sound like a lot of work? It is, but it’s worth it. When you offer to help people solve problems and learn from your mistakes, bloggers and writers will be a lot more interested.

More importantly, readers will be more interested in the news you want to share because first you helped them—and that gives them a great reason to be interested in your business.

Topics: marketing PR
Continue Reading

Recommended For You

Community

Let's Connect

And, you can find me on Google+, Twitter, and Linkedin.

Recent Posts

Chat with GrowthBot

It's a bot to help you with your marketing and grow. You can research your competitors, improve your SEO and a lot more. http:/GrowthBot.org