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JANUARY 31, 2023 by DIANE BALDIN
Are Your Investor Updates Holding Back Your Startup's Funding?
Let's be honest. As a startup founder, you probably think, "I don't have time for this investor update nonsense." "I've got a business to run!" "I have to search for new clients, expand my customer base, find the best workers for the team, keep up with new technologies, and introduce the best of them to improve my business."
But hear us out; not using investor updates at every stage of your startup's growth could be holding back your funding. It's like trying to run a marathon without keeping track of your miles; you're just going to end up lost and exhausted.
As any startup founder knows, securing funding at every stage of growth—pre-seed, round A, round B, and beyond—is the key to reaching that billion-dollar milestone. The updates give investors a clear picture of the company's progress, performance, and plans, which can help generate interest and build trust. In this article, we will examine the benefits of investor updates at different stages of startup growth, including pre-seed, A, and B rounds.
How Investor Updates Help Pre-Seed or Seed Startups: Showcasing Vision, Team, and Plans
In the pre-seed round, startups are just getting their footing and are looking for early-stage funding to develop their product or service. Think of this stage as the "elevator pitch" phase.
Investors at the pre-seed stage are not interested in the numbers and economics of your company. They're more focused on your team as an investment. So, you can ask, what's the point of sending investor updates if the main part consists of financial metrics and you are telling us investors don't want to see that?
But there is your chance to stand out from other startups in investors' eyes.
All you need to do is optimize the updates' structure for your needs. At this early stage, the team can describe its progress, iterations, and development, show it all in numbers and send it to the potential investors regularly. This makes you look like a professional; your startup has a clear vision and a well-thought-out plan. And what distinguishes you expedites the process of raising funds in the next round!
Don't just send generic financial updates. Make it about you and your team's journey. Show investors what makes your team the main investment worth considering!
Demonstrating Progress and Proven Success: The Importance of Investor Updates in the A Round
In the A round, startups pursue significant funding to propel their businesses to new heights. At this stage, the startup already has a product market fit and is ready to scale its already successful model. So now companies do more than just iterations.
Quantitative metrics for investor updates are already established to show investors how the startup is growing rapidly. These metrics are crucial in evaluating the company, not only based on qualitative factors such as the team's experience and skills but also on the company's finances. Cash on hand is a vital financial metric as it reveals how the company handles money management during its rapid growth.
Confused about what metrics to include in your investor update? We've got you covered! We've created an entire article on this topic. Check it out here.
Reach New Heights in Round B: Growth, Performance, and Achievements to Attract Investors
Finally, startups are ready to become influential in the B round and expand their businesses to new heights.
At stage B, the company is significantly expanding its staff, and we are talking not only about the increasing number of developers, product managers, etc. Very often, a responsible person enters the arena—a consultant whose primary responsibility is communication with investors (including investor updates).
If the founders write an investor update themselves, it's more complex. The founder already faces an overwhelming number of tasks in stage B as the company expands with complex product growth in multiple directions and an influx of news and events.
A staggering 63% of companies that successfully raised Round B went on to secure Round C funding. However, the odds of securing investment decrease as you move further away from the pre-seed stage. Keep those statistics in mind whenever you consider whether or not to write an investor update.
The founder's job becomes more difficult with more metrics to track and investors to report to. Of course, you'll include meeting certain KPIs for revenue and growth. New obstacles emerge, such as creating a systematic approach, avoiding forgetfulness, and distinguishing different terms (correlation from causation) in vast amounts of data. And there is no room for mistakes because, as you grow, you become a more important player in the market, and every investor is watching you.
But hear us out; not using investor updates at every stage of your startup's growth could be holding back your funding. It's like trying to run a marathon without keeping track of your miles; you're just going to end up lost and exhausted.
As any startup founder knows, securing funding at every stage of growth—pre-seed, round A, round B, and beyond—is the key to reaching that billion-dollar milestone. The updates give investors a clear picture of the company's progress, performance, and plans, which can help generate interest and build trust. In this article, we will examine the benefits of investor updates at different stages of startup growth, including pre-seed, A, and B rounds.
How Investor Updates Help Pre-Seed or Seed Startups: Showcasing Vision, Team, and Plans
In the pre-seed round, startups are just getting their footing and are looking for early-stage funding to develop their product or service. Think of this stage as the "elevator pitch" phase.
Investors at the pre-seed stage are not interested in the numbers and economics of your company. They're more focused on your team as an investment. So, you can ask, what's the point of sending investor updates if the main part consists of financial metrics and you are telling us investors don't want to see that?
But there is your chance to stand out from other startups in investors' eyes.
All you need to do is optimize the updates' structure for your needs. At this early stage, the team can describe its progress, iterations, and development, show it all in numbers and send it to the potential investors regularly. This makes you look like a professional; your startup has a clear vision and a well-thought-out plan. And what distinguishes you expedites the process of raising funds in the next round!
Don't just send generic financial updates. Make it about you and your team's journey. Show investors what makes your team the main investment worth considering!
Demonstrating Progress and Proven Success: The Importance of Investor Updates in the A Round
In the A round, startups pursue significant funding to propel their businesses to new heights. At this stage, the startup already has a product market fit and is ready to scale its already successful model. So now companies do more than just iterations.
Quantitative metrics for investor updates are already established to show investors how the startup is growing rapidly. These metrics are crucial in evaluating the company, not only based on qualitative factors such as the team's experience and skills but also on the company's finances. Cash on hand is a vital financial metric as it reveals how the company handles money management during its rapid growth.
Confused about what metrics to include in your investor update? We've got you covered! We've created an entire article on this topic. Check it out here.
Reach New Heights in Round B: Growth, Performance, and Achievements to Attract Investors
Finally, startups are ready to become influential in the B round and expand their businesses to new heights.
At stage B, the company is significantly expanding its staff, and we are talking not only about the increasing number of developers, product managers, etc. Very often, a responsible person enters the arena—a consultant whose primary responsibility is communication with investors (including investor updates).
If the founders write an investor update themselves, it's more complex. The founder already faces an overwhelming number of tasks in stage B as the company expands with complex product growth in multiple directions and an influx of news and events.
A staggering 63% of companies that successfully raised Round B went on to secure Round C funding. However, the odds of securing investment decrease as you move further away from the pre-seed stage. Keep those statistics in mind whenever you consider whether or not to write an investor update.
The founder's job becomes more difficult with more metrics to track and investors to report to. Of course, you'll include meeting certain KPIs for revenue and growth. New obstacles emerge, such as creating a systematic approach, avoiding forgetfulness, and distinguishing different terms (correlation from causation) in vast amounts of data. And there is no room for mistakes because, as you grow, you become a more important player in the market, and every investor is watching you.
From the investor's point of view, at this stage, they tend to pay close attention to classic indicators—revenue, financial management, and good cash on hand.
These are the other metrics that are monitored the most often:
The founder of the startup at any stage should remember the following:
—By providing detailed information about the company's customer base, market share, and other key metrics, startups can demonstrate their ability to scale the business and achieve significant growth.
—By highlighting key partnerships, strategic acquisitions, and other important milestones, startups can show investors that they are progressing and achieving their goals.
To wrap up here, investor updates are like the "power-ups" in your favorite video game—they give you the boost you need to level up and advance to the next stage of your startup's growth. And just like in a game, if you're not using them correctly, you're missing out on a major opportunity to succeed.
These are the other metrics that are monitored the most often:
- Revenue growth and revenue model
- Gross margins and operating expenses
- Market size and target customer segments
- Customer acquisition cost and retention rate
- Product differentiation and the competitive landscape
- Team composition and experience
- Traction and key performance indicators (KPIs) such as monthly recurring revenue (MRR), churn rate, and lifetime value (LTV) of a customer.
The founder of the startup at any stage should remember the following:
—By providing detailed information about the company's customer base, market share, and other key metrics, startups can demonstrate their ability to scale the business and achieve significant growth.
—By highlighting key partnerships, strategic acquisitions, and other important milestones, startups can show investors that they are progressing and achieving their goals.
To wrap up here, investor updates are like the "power-ups" in your favorite video game—they give you the boost you need to level up and advance to the next stage of your startup's growth. And just like in a game, if you're not using them correctly, you're missing out on a major opportunity to succeed.
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