How To Nail Your Investor Reports

It’s a necessary evil for every startup. No matter whether you do it monthly or quarterly, investor reports and communication ensure you stay accountable to your external partners, and ensures you get the best mentoring and advice.

On paper, the entire practice can look very dry. After all, who looks forward to spending a half-day in front of a PowerPoint slide show going over the same financial details over and over again? However, when you prepare it right, an investor report can go beyond a simple presentation and request for help. Instead, it can tell the story of where your company was, where it’s going with the input of your investors, and what you someday hope it will become with their support.

Before your executive team puts together their next investor communication, invest some time in transforming it into an experience. Here are some tips to help you nail your next board meeting or monthly update.

 

Just the Facts: Numbers, KPIs, & Projections

First and foremost, an investor update will typically focus on how your company is performing financially. While there will be an opportunity to share your vision, talk about product, the market, and mission later, the important numbers need to come first. Every investor report should begin with an overview on profit and loss and cash flows for the time period, key performance indicator (KPI) status (churn, cash burn, LTV, etc.), and any projections your team is comfortable reporting.

Reviewing profits and losses is more than a line-by-line report of where money was earned and what was spent. By going over metrics like burn rate, cost per acquisition and churn rate, you can utilize financial and operational data, and the combined intelligence on your board, to diagnose problems and identify solutions that can keep your company on a positive trajectory or identify problems before they occur. Effective data management is key to this process and can’t be understated.

Reviewing the key performance indicators your company set with your investors allows you to showcase what’s working or solve for what’s not. We believe management should always show up to board meetings with a solution in hand, while leveraging the board’s years of cumulative experience to ensure that it’s the right solution. This is accountability for both you and your investors. Positive work on KPIs shows your investors you are using their resources wisely, while stagnant or falling KPIs give everyone in the room the opportunity to discuss the trends and identify a positive path forward. Remember, even your investors have someone they report to.

Finally, projections don’t necessarily have to be an exact path to where you expect to be next report — but they should speak to the general direction of the business and be tied to historical data. They can include financial projections, product goals, or a targeted list of your goals, allowing you to share ideas with investors and get feedback on what comes next for the startup. The questions and responses you get here can help your leadership determine if you are on the right path.

 

Transparency is Key in Investor Reports

Your investors have a stake in what your company does, so it’s critical to share business updates. This goes beyond numbers, features and reports. This includes talks with potential investors, or even proposals for an acquisition or merger.

In today’s busy startup world, it’s not uncommon for smaller companies to be approached by much larger corporations or venture capital funds for direct investment or an M&A offer. Since your investors have their money on the line, they need to be up to speed on these conversations as it could have ramifications on their ownership position. Sharing information up-front instead of coming to them to sign off on approval can not only build good relationships with your investor panel, but also offer good advice on whether a particular deal or acquisition offer is a valuable proposition.

Equally important are discussions about bringing in other investors from outside the current panel. Adding additional investors without discussing with the current panel could not only lead to conflict, but also change the trajectory of the business. There are many clauses in investment agreements that will require you to notify other investors and potentially even offer the investment deal to them first before a new investor. It also may not even be possible to accept investment without sign-off from current investors — check your most recent rounds’ investment term sheet if you’re not sure. By being upfront with new potential investment proposals, your team can thoroughly analyze them to determine if it is a good move overall.

 

Inject Storytelling Into Your Investor Reports

Although you are presenting your data and analysis to a board who has a financial interest in your success, they are also people who have a personal stake in your startup. The investor report you deliver is a prime opportunity to re-energize your investors about the work you are doing, and why it’s important.

Once the numbers are out of the way, your investor report gives you an excellent opportunity to talk about your charted path. Product updates, sales team victories and milestones your team reached over the reporting period are all positive business indicators. These are all reasons to celebrate, and should be used to showcase the importance of your work and the effective use of investment dollars in the business.

But perhaps your biggest voices come from the people that work inside your company, and those who are benefiting from your work. By injecting the voice of the customer, alongside the success stories of employees, your executive team can create a human connection to what your startup does. This real activity can help your investor panel get excited, and potentially unlock new advice or direction into your business.

 

Need Help Nailing Investor Communications?

Investor relations can be intimidating, but you don’t have to go about it alone. airCFO can help you not only keep your numbers right, but help you discover balance between reporting, analysis and connection with your panel. Contact us today to get started on building a process that will leave them in awe of your startup.

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