Guide: How to create the best investor updates for early stage latin american startups
The best entrepreneurs send investor updates religiously. Whether it's monthly or quarterly, the best founders pick a cadence and stick to it. In good times and in bad. They don’t hide anything. They write directly and keep investors up to date. Investor updates are especially important through at least Series B, where reporting can start to evolve into more formal board-only updates.
After reading many investor updates, both from Magma portfolio companies and companies we didn’t invest in, we wrote down an actionable list of what we think is the best way to structure a company’s investor updates, specially for pre-seed and seed stages.
- Be consistent: pick a cadence and stick to it, either every month, two months, or three months.
- Be as transparent as possible with current investors.
- Write a special investor update if something important happens, especially something bad.
- Include highlights, lowlights and always include asks.
- At early stage especially, create a less detailed version for potential future investors.
Step 1. Decide who you will send the updates to
Some founders send to only their current investors. Others send to potential investors or advisors too. Once you get to Series A, some founders will further subdivide current investors into major investors/angels who help and then send a less detailed version to smaller investors.
We suggest keeping it simple to start and creating one list for current investors, and one list for potential investors.
Step 2. Write the detailed version you’ll send to current investors
Start here. Your update to current investors is the most detailed version you’ll write. You will mostly delete information for the less-detailed potential investors version.
You should be as transparent as possible with your investors. Is always easy to give good news, but like the Godfather, VCs prefer to get bad news immediately. Why? It helps you and us start to react quickly, and not be surprised at a board meeting 2-3 months later. It almost always helps you as a founder to tell us. You get the bad news out of your system, and for the most part, the bad news isn’t as bad as founders think. Even when it’s really bad news.
I always gain respect for founders who reach out directly when something bad happens: losing a cofounder, getting fired by a big client, big problems with employees, etc. Being fast and direct with bad news builds trust, not to mention could help you find a solution.
This isn’t to say I want to know whenever you lose a small client or for every little thing that goes wrong, but as Alex Iskold says on one of his blog posts “If you raise money from investors, and next time they hear from you is 12 months when you are out of money or need an introduction to another investor, they aren’t likely to be happy and aren’t likely to be willing to help.”
Suggested structure: there are different templates founders can find on the internet, just make sure to present your updates with actionable items. Here’s a simple structure we suggest:
- 1-2 sentences reminding investors what you do. This is really important for angel investors and syndicates who have tons of investments, or really big funds that wrote small checks.
- Metrics/KPIs - Burn rate, runway, revenue, expenses and months of runway are the bare minimum. Ideally, include margins, growth rates, burn multiple, some basic guidance on what you’ll do for burn/revenue in the next period, and depending on your business. Include if you’ve raised money or if you are raising money.
- Highlights - Add any good news you want to share.
- Lowlights - Any challenges you are facing. Remember to be honest and never hide bad news.
- Asks - How can investors be helpful? Intros to potential investors, partners, potential hires, strategy questions etc. Try to be as specific as possible.
How often should you send these updates?
Especially for pre-seed and seed stages we recommend sending updates every month. Once the business gets good traction and isn’t close to running out of money, feel free to switch to every 2 months or every 3 months, but some of the best startups we’ve invested in have continued to write monthly updates even as they’ve moved into Series B and later.
Should I include potential investors on my investor updates?
There’s some conflicting advice around sending investor updates to potential investors and investors who have said “not yet.” We suggest that you do send updates to potential investors, but not more than every 2 months.
I like sending a shortened version because it helps investors make your data points into a trend line.
You should be direct, outline your highlights on a high-level basis to get VCs interested enough so they can reach out to get the details on your progress or to schedule a meeting.
Be sure to include 1-2 sentences reminding investors what you do. I can’t stress this enough. We see 1500+ startups per year. There’s no human way possible to remember who your company is if you don’t tell us right off the top.
Take out the lowlights, and reduce the KPIs that you share, unless the KPIs are amazing. Pick a few metrics that make you look good, and make someone want to get more info.
End with a call to action. If you’re interested in learning more or have any feedback to my update, book on my Calendly, respond to this email or feel free to reach out.
You should decide the periodicity of your updates and stick to it, as it could get confusing for investors, especially when you try to compare different periods.
We’ve seen companies raising capital out of these investor updates just by creating Fomo for outside VCs because of a startup’s great progress. If done well, these are great pieces of “content” that will bring organic demand to your startup.
If an investor tells you to stop sending, you should stop sending.
What format should I send?
As Tono Mandly, Rio Grande co-founder and CEO, put it in a twitter thread:
“Make it stupid simple for investors. No pdf. Email and short. The update needs to be read in less than 3 mins.” Send via email because “most investors read them in Ubers or on the toilet.” Any extra friction reduces the chances you’ll actually have investors reading them.
Keep in mind that investor updates don't need to be perfect, you just need to have the discipline to follow a cadence and this will ultimately impact your company in many positive ways. As Jason Calacanis mentions in an episode of his podcast “This Week in Startups”, investor updates will help to build credibility with investors, so if things are going well founders might get able to close quick additional checks at a higher valuation or on the contrary, if things are going poor, investors might be able to offer help or a bridge round.