Why Awaiting Good News Is Not A Strategy: The Imperative of Regular Investor Updates

The startup realm is not for the faint of heart. It’s a domain where the tides of fortune can turn swiftly, sometimes without a whisper of warning. As a startup CEO, your investors are not just silent spectators but pivotal players in your venture’s narrative. The tradition of only parading the good news before them is not just outdated but perilous. Here’s a glance at the pitfalls and the promise that lay on the path of investor communication:

The Pitfalls of Awaiting Good News

• Misalignment of Expectations: When investors are in the dark, their expectations can veer off the reality track, brewing a storm of discontent.
• Erosion of Trust: The bedrock of trust crumbles when updates are sporadic and only rosy.
• Missed Follow-on Funding Opportunities: Silent periods could translate to missed follow-on funding, choking your startup’s growth.
• Lack of Investor Engagement: An uninformed investor is an unengaged investor, a lost opportunity for valuable insights and resources.
• Increased Investor Inquiries: The more the silence, the louder the inquiries. Your inbox might morph into a battlefield of “any updates?” emails.
• Surprise During Downturns: When the inevitable rough patch hits, it hits harder when it comes as a surprise to your investors.
• Reputation Damage: Your reputation, once tainted by a lack of transparency, is a tough one to mend.
• Difficulty in Building Long-term Relationships: Short-term good news can cost long-term relationships.
• Limited Understanding of Challenges: Without the full picture, investors may underestimate the hurdles faced.
• Feeling of Being Undervalued: Investors aren’t just ATMs; they seek inclusivity in your venture’s narrative.

The Promise of Regular Updates

• Increased Likelihood of Follow-on Funding:
  • Your startup’s lifeline often extends with the benevolence of follow-on funding. Our friends at Visible VC found that startups that maintain a regular communication rhythm with investors are twice as likely to secure follow-on funding¹.
• Avoidance of Unnecessary Queries:
  • Keep the updates flowing, keep the questions at bay. Blossom Street Ventures echoes this sentiment, emphasizing the reduced frequency of investor queries with regular updates².
• Building Trust and Transparency:
  • The trust forged through transparent communication is your shield when challenges besiege your startup.
• Proactive Issue Resolution:
  • Timely updates morph potential crises into proactive discussions, leading to timely resolutions.
• Setting Expectations:
  • A well-informed investor is a well-prepared investor, ready to ride the tides with you.
• Investor Engagement:
  • Engaged investors are allies, providing more than just capital. Their expertise and network are just as crucial, if not more.

The chronicle of waiting for a sunny day to update your investors is a risky gamble. Your investors are your venture’s co-pilots. Keep them informed, engaged, and prepared for all weathers, ensuring a collaborative journey towards success.