How to Crush Investor Updates

Alex Lieberman: What's up, everyone? I'm Alex Lieberman. 

Jesse Pujji: Yo, this is Jesse Pujji. 

Alex Lieberman: And this is The Crazy Ones. What's up, everyone? This is Alex Lieberman, co-host of The Crazy Ones. Welcome back to another abbreviated episode in the old Founder’s Journal style of the show. This is going to be a short episode on how to crush an investor update, so keep listening. People have been loving the shorter episodes that we've been doing the last few weeks. Jesse did one on off-sites. I did one on this Building a Second Brain course that I have been taking that I've been fascinated by. So we're gonna keep them going.

I do have one quick ask for you before I start the episode, so that we can make sure we create content around the stuff that's most important to our listeners. Shoot us a quick email to thecrazyones@morningbrew.com, and share the most pressing challenges or your most burning questions related to building a business. Jesse and I both read all of these emails. We get back to all of these emails, and we will pick some of our favorites for our upcoming short episodes like this one. Today's episode is all about how to crush an investor update. So let's do this thing. 

I wrote my first investor update for The Plunge, which for those of you that don't know is my axe-throwing-inspired backyard game. And it reminded me just how important investor updates are. And by the way, I don't have any investors for The Plunge, but I wrote this to force myself to think strategically about the business. Now, why am I covering this topic of all topics we could talk about in the world of startups? It's because I believe that founders are better operators when they write investor updates. It is so incredibly easy to get stuck in the weeds just doing, doing, doing when you're running a business, especially in the early days. And the act of writing recurring investor updates is a force function for thinking strategically and deeply about your business. It's a way that you can get a thousand feet up in a skyscraper to view the whole city, versus constantly just being at the ground floor of the city or at the street level, only being able to see a block ahead or a block to the side. 

There are going to be three parts to this episode. First, I'm gonna share what some super successful entrepreneurs and investors said when I asked them, “How do you create an A plus investor update?” Second, I'm going to share why it's so important to write these regardless of if you have investors. And third, I'm going to share an outline for writing a kickass update, so that you don't have to deal with the daunting task of staring at a blank email and having no guide.

So let's start with part one, my tweet. A few days ago I tweeted, very simply, “What should a founder do to write an exceptional investor update?” And I got some fascinating responses. Emmett Shear, who's the co-founder of Twitch with Justin Kan, and I believe they have one other co-founder, he said, “Be growing fast with good unit economics, then just send whatever update you want.” Obviously he was saying it a little tongue in cheek, but I'm sure he was being kind of serious, which basically what he's saying is, at the end of the day, if your business is crushing it, everything else doesn't matter because that's what investors are looking for. So I think just a good kind of caveat to this whole episode is, an investor update is not a way to mask bad business performance. It's not a way to distract yourself from operating a successful business. It's a way to communicate to your investors why you're being smart with their money. It's a way to hold yourself accountable. I'll talk about all the reasons why, but at the end of the day, all that actually matters is running a business that's growing with good unit economics. And Emmett pointed that out. 

Second tweet response I got, or second reply. Howard Lerman, who's building a business called Roam, and he's the co-founder of Yext, which is a multibillion-dollar company. He said, “Consistent format, consistent timing. Summarize key takeaways, summarize the metrics, let people make their own conclusions. Don't oversell, manage expectations, don't ramble about product strategy. You shouldn't need any help there. If you do, you're fucked.” A lot of good stuff here. The one thing I'll call out that I find to be, I would say different from what a lot of people say is, he said, “Let people make their own conclusions. Don't oversell.” I think it's such a great point. At the end of the day, you wanna give people the information, you wanna provide a little bit of guidance on how they can interpret the information to the extent that it saves them time, but also you don't wanna sugarcoat things. And I've found this even kind of on a different part of running a business, which is, it's so easy to talk to, especially like salespeople and marketers who are great talkers and they spin things really well. It's so easy to get fooled into thinking that something that is spun well is actually good, versus just focusing on the objective facts, the objective information, the objective metrics. So I think Howard makes a really good point, which is at the end of the day, you know, a little bit of contextualizing is helpful, but let people come to their own conclusions. 

Next one is from Eric Jorgenson. He's the author of The Navalmanack. Basically he took of all of Naval Ravikant's tweets, turned them into a book. He said, “One to two key metrics, usually chart them, share the rate of change, a few bullet points on what your focus is, and any opportunities to help.” What I love about what Eric said is he just kept it so simple and he shared basically four things, and he didn't provide this whole list that turns into a 50-minute read that no one has time for. So that's what I appreciated about his reply. 

Next one is Bryan Rosenblatt, who is a partner at Craft Ventures. Craft Ventures is a top B2B venture capital firm. He said something like this: “Key metrics, wins and losses, financials, meaning cash in the bank, last month burn, cash burn, and runway. He then said, number four, updates on product and the team. And five, ask for investor, sorry, asks for investors—so things you want investors to help with—and shout-outs to those who have helped.” Keep some of the things that Bryan said in your brain, because I'm gonna be hitting on a lot of them when I talk through “How will you crush your investor update?” 

Two more. Nick, who runs growth at Ramp, and Ramp is, I believe, the fastest-growing company to go from zero to a hundred million in ARR. They do like cost help. They basically almost act as a CFO for your business through technology. He wrote “Just writing one monthly, never missing a month, is 90% of it. Including the same metric, whether it's revenue, users, whatever, at the top, is 10%; everything else is fluff.” What he's basically saying is people overcomplicate these things. Just building the habit of writing these updates, like showing up to the stadium and playing in the game, is the vast majority of it. And then being consistent in covering the most important metric for your business, so that investors can see how it trends over time, is the other 10%. And so I love how simple he keeps it, kind of like what Eric Jorgenson did. 

Final one is from Turner Novak. Turner is a great follow on Twitter. He has great thoughts around the investing landscape, but also he's just hilarious. He's great with memes. He runs a fund called Banana Cap. So he’s literally created a meme out of his fund. What he said is, “Giving individual shout-outs to people is huge. Quote: ‘Thanks, X, for intro to Y.’” He said, “You motivate people to get their name listed on every email.” I totally agree with that, and we'll get into why giving shout-outs to investors can be such a powerful tool in your investor update. 

Okay, so now let's, now that I've covered kind of what prominent entrepreneurs and investors have said and I tried to home in on, you know, what are the one or two things in their reply that you should be placing focus on. 

Now let's talk about why you should write an investor update in the first place, and what your main goal should be when you write it. You need to know why it's important, so it's worth spending your time on, and you need to know what your main goals are. So when we talk about the format of a killer investor update, everything kind of stems down from what your goals are. The format is informed by what you're trying to achieve. So your main goal should be first, show your investors you're being a thoughtful steward of their money. You are sending an investor update so investors have confidence that you have taken their $10k, $25k, $250,000 checks and you are using it wisely and you're being strategic about your business based on what you're trying to build your company into. 

The second goal is, you are trying to mobilize your investors to increase the odds of success of the business. Said differently: How do you use your investors as tools to increase the probability that your business succeeds, and increase the probability that their money is worth more in the future? One thing I'll say anecdotally is I was terrible in the early days of Morning Brew of leveraging advisors or investors to ask them for help. I always created excuses for why I wasn't doing it. And any business I build in the future, I'm going to be so intentional about the people I let invest in my business and the asks that I make to them. 

The third goal of your investor update is to hold yourself accountable to strategic and deep thinking. As a founder, you don't have a boss. Your investors aren't really your boss. An investor update basically imitates part of the responsibility that you would have to your boss. Daniel Gross, who's a great investor, he put it really well in a resource that I'm gonna share in the show notes. He basically wrote up “how to write a great investor update,” and I'm gonna share it in the show notes, but he said, “Think macro. An investor update gives you a moment to climb to the 1,000th floor of the building and observe the city landscape unfold.” Kind of like what I was describing earlier: You're always at street level in the early days of the business. Writing an investor update gets you to the top of a skyscraper to see the entire city. 

Now, before I share an exact outline that you can use for writing a killer investor update, let me just mention a few general best practices to keep in mind. First, as I mentioned, you should send investor updates even if you don't have investors. I sent my first one for The Plunge last week. I'm planning on doing it weekly until we launch our product into the world. Once we launch it into the world, I'll probably go to monthly, and then once the business is hopefully at steady state, it'll go to quarterly. It is a force function for me being accountable. So it doesn't matter that I don't have investors. 

Second general rule of thumb: Consistency, like Nick from Ramp said, is 90% of the game, because it creates a habit of strategic thinking so you never get too comfortable about your business and it makes you routinely top of mind for your investors. Again, investors have a portfolio of companies. Unless you are doing something to force yourself top of mind, you're not gonna be top of mind for them. 

And the third rule of thumb: Try to keep your investor update under a five-minute read. Beyond that, you lose people's attention. And feel free to have an internal version of your update that's more thorough, that just kind of forced you to go through the full exercise. But remember, as I said, for most investors, you're not their only investment, so they're probably getting dozens of these write-ups a month. 

And finally, let's talk about how to crush your update. What I've done is taken some of the feedback from the entrepreneurs that I mentioned earlier, and I combined that with updates that I've written in the past, both for Morning Brew as well as for The Plunge, as well as updates that I've received from my portfolio companies. And I've taken all of this to basically think through, how can you craft what I believe to be a format that will work for most founders, whether you have investors or you don't? 

So first part of your investor write-up, I call it section one, is the must-read, and the must-read is the thing that you will definitely write in every investor update. And you should keep this below five minutes, because this is the thing that an investor must read. If they don't read anything else, they're reading section one. And in this section you start with a summary. That summary includes your financials, because at the end of the day, nothing about your business matters—your mission doesn't matter, your product doesn't matter, your team doesn't matter—if you run out of money. That is why you talk about your financials first. You will share your revenue, you will share your burn rate. So how much cash are you burning each month, and what is your cash in the bank, or runway? Said differently, if you were to continue with the same trajectory every month, meaning the revenue you have this month and the cash you're burning this month, basically how many months do you have before you run out of cash? 

The other thing I would include in your summary after financials is basically your short-term goals. It could be OKRs, it could be Rocks. So Rocks are the traction process that we do for Morning Brew. It could be DFS, desired future state, which is what my co-host Jesse uses. Or it doesn't have to be one of these formal frameworks. You just have, let's call it two to seven short-term goals you wanna hit as a business. And in this summary you should, of your goals, you should show what your goal is, the current metric, and how you're pacing to that goal. The reason…I would say a lot of investor updates don't include their short-term goals. And when I say short-term, I would say anywhere from one to three months, based on how often you're sending investor updates, and what stage you are of the business. The earlier you are in the business, the shorter-term your goals should be. The reason I think it's good to include these goals and how you're tracking against these goals is it is a force function for you to start goal-setting in your business early, even if it's not one of these more traditional methods that you could set up later in the business like OKRs or Rocks.

So we have financials, we have your short-term goals and how you're tracking against them. And then you're gonna finish your summary with a one-liner that basically says how you feel about the business right now. And it is the one thing you want investors to remember after reading your update. Why do I believe in the one-liner? Because my belief is people are parrots. We consume so much information in life and we remember maybe 1% of what we consume. And so people will say what you tell them, but you have to be explicit about what you want them to say. So think about this one-liner or this kind of finisher to your summary to be the one thing that you want your investors to say to their network when they are asked about how your company is doing.

Okay, so that's the summary. After the summary, and this is still in the must-read section that is below five minutes, is your most important ask for investors. So a few rules of thumb here: Don't include more than three asks. Beyond that, people don't have a sense of what's important. Of those three asks, if you have three, put them in order of priority, and then third, be as specific as possible about your asks. So examples of what I would deem good asks by entrepreneurs is: introductions to Shopify stores that you think could be a good fit for us as a customer, or introductions to marketers that have or are interested in running newsletter advertisements, or sharing the launch of our education product on social. So you wanna be specific, and you wanna be specific about what you need and who you're looking to be connected to. 

After the asks for investors, you wanna do shout-outs and thank-yous to investors. So basically, if hypothetically I was writing an update for the month of February, I will list out shout-outs to investors that helped us with our business in January. And you should be as specific in your shout-outs, because investors will feel acknowledged when you actually remember exactly how they helped you. Why is the shout-out section important? Because just like entrepreneurs, investors are competitive. They like being atop the leaderboard. And so if you can gamify and create a leaderboard on your monthly or quarterly investor update, they are going to be motivated to add value, because they want to be seen as the winner of investors. 

So that is section one. So just to recap all of the parts of section one, and this should, again, should all take less than five minutes to read. Section one of your investor update should be a summary that includes your financials; it includes your short-term goals and how you're trending against those goals. And it includes a one-liner about basically what is the thing you want people to say when they're asked about your business right now in market. So that's the summary. The second part is your most important asks for investors. And the third part is shout-outs and thank-yous to investors. That is the must-read. That is all you should expect your investors to read on a monthly or quarterly basis. 

Now the second part, section two, is what I deem the “nice to read.” And I would make clear, if you're going to have a section two in your investor updates, you should make it clear to your investors that they should just read this if they have the time, but it is not mandatory. There are a few ways to do a section two, so I'm gonna share how I would do it, and then I'm gonna share how I've seen others do it. How I would do it is to provide a more detailed commentary or information relating to your short-term goals. So again, whether you use OKRs, whether you use Rocks, whether you use Desired Future State, basically provide commentary on, let's call it your three to seven goals for the quarter, how you're tracking against them, and the most important things investors should know about how you're tracking towards your goals. And the reason I would structure section two in this way is it focuses your entire update on the most important priorities you've set for the business. Because if these weren't goals or OKRs or Rocks, then they wouldn't be priorities for the business. So these are the only things that matter because you've set them as your only goals. That's how I would do it.

Two other ways that I've seen entrepreneurs do kind of the section two. One way is to go function by function in the business, where you provide the most important updates or information from around your business. So you provide your most important updates on team—so where you're hiring, people you've let go, kind of the breakdown of your team by function right now, et cetera. You could do a section on product design and engineering. You can do a section on operations, on finance, on marketing, both organic and paid. So that is the way to do it, where you break down the whole business by function as your section two. 

The other way I've seen it done is kind of where you have a general updates section. So it's a catch-all for basically the one or two major things that have happened in each part of the business. So the one or two things that have happened in product, in team, in operations, in marketing, et cetera. And then after general updates, you have your highlights or your wins, you then have lowlights or your failures or losses, and then you have your priorities for the next month. And so those are three options for how to do this section two or “nice to have” of your investor update. 

And so that's why you should write investor updates if you're running a business, what your goals with your investor update should be. Again, it should be showing that you're a great steward of your investors’ money. It should be to leverage your investors as catalysts for your business, so you increase the probability of success, and it should be a force function for you to think strategically. And then finally in this last piece, we covered how you actually write a killer update. 

Now before I go, just a few logistics. First, reminder: Send in any problems or challenges or questions related to the business that you are building that you want us to cover in an upcoming short episode like this. Shoot an email to thecrazyones@morningbrew.com. Jesse and I read every single email in the show inbox. So we are gonna go through everything that you send. Second, in the show notes, I'm going to put a few of my favorite resources around investor updates. I hope you enjoy them. They've been super helpful for me. And that's a wrap, everyone. I will see you all next episode. I will be back with my co-host, Jesse. Until then, stay crazy and I'll talk to you later, crew.