How To Communicate With Investors. Tips For New CEOs

Posted on July 12, 2011
Filed Under Entrepreneurship |

Andy Swan, one of my angel investors, asked if I would publish some of my investor emails. I’m not ready to do that, but I do think investor communication is important and difficult for new CEOs. Since several of my investors have commented that they like the format I use, I will share it here for those of you who may be interested.

First Some History
My first angel investor was Dharmesh Shah, and in those days when it was just me, Dharmesh, and my co-founder Vik, I just emailed Dharmesh whenever I had a question. After a few months, Sean O’Leary and Sterling Lapinski from Genscape joined as angels, and I began sending out weekly emails about what we did. In a very early stage company, a week is a long time, and the emails weren’t really to keep them informed as much as for me to aggregate all my questions for them in a single place.

When I took a seed round of funding in January 2010, I almost stopped sending the emails. It can be intimidating, as a newly backed CEO, to communicate with a bunch of wealthy successful people who you know will be judging everything that you say. It seemed easier not to do it anymore, but Vik convinced me that there were benefits beyond just keeping investors apprised of company events. There were career benefits. Raising money is about relationships, and these letters were a great way to build those relationships. So I moved them to twice a month, and then post A round (August 2010) moved to a once a month format.

Investor Email Format
Once I month I send out an email that looks something like this…

Heading I always title it “Backupify End of (Insert Month) Update” and the first line of the email says “This email is divided into <#> sections” Then I list the sections in the email. This is important because these emails are sometimes long, and if someone has a specific issue they want to know about, they can see whether it is covered in the email and they can jump to that part. Sections I have used include: Intro, Bad News, Good News, Update, Fundraising, Partnerships, Strategic Discussion, Technology, Marketing, How You Can Help, and Summary. Any given email usually has 4-5 sections.

Intro- Every email has an intro where I list cash in the bank and projected cash out date, since this is probably the most important thing to know for an early stage company. I also put other metrics in this section sometimes, but over the history of Backupify they have changed. We used to measure free consumer signups, but we don’t worry about those any more. Now it’s revenues and Google Apps backup seats. I also list any new hires in this section.

Bad News- Bad news always comes after the intro because I like to get it out of the way and end on a more positive note. Some CEOs hate to share bad news, but if you have good investors they shouldn’t be scared by it. They invest in lots of companies that go away, and it isn’t always the fault of the company or the team. Some markets never develop, and those that do almost never develop as planned. If your investors can’t deal with some bad news, you picked the wrong investors. About 3 out of 4 emails have bad news, but sometimes I get to say “nothing to report.” Those are my favorite months, of course.

Bad news for us has ranged from losing a major deal or a good customer, having a major tech problem, a surprising cost spike, an experiment that didn’t pan out well, firing someone who didn’t work out, or something similar. If the bad news is something that may be ongoing (e.g. higher than expected costs of something, increased churn, etc) I talk about what we are doing to fix it.

Bad news is usually just a few sentences or bullet points.

Good News- There is always good news, and in the 2.5 years of Backupify’s life, I have probably sent 40 of these emails, maybe 2 or 3 of which had more bad news than good news. In general, good news consists of hitting milestones, landing a marquee client, learning something key about the market, closing a new partnership, or something along those lines. I don’t talk about everything good in the company, even when we have really good months, but I focus on the top 3 or 4 things that happened. The point isn’t to be a pep talk to investors and list 1000 little positives - it’s to share important things that affect the direction and success of the company.

Good news is usually just a few bullet points with extended explanation, or at most two paragraphs.

Update- The update section is where I go into more detail on specific things. This section is the one I assume most people skip. It can be as long as 7 or 8 paragraphs sometimes. I use it to clarify points from earlier in the email, or explain one or two key issues in depth. This is also where I put topics that may not be interesting to all investors, like technical details or specific information about marketing programs.

Strategic Thinking- Every 3-6 months I put one of these sections in to tell investors how I am thinking about the company and where we are going. This can be long too, or occasionally can be an attached Powerpoint deck or Word document.

How You Can Help- Investors like to help, but they often don’t know where they can contribute. If you make it easy for them by clearly stating what you need, you are likely to get it. This section usually has just one or two things I need, either an intro to someone, a supplier for something, or some brainstorming around a specific problem. Occasionally I leave this section out because we are just heads down on something and I don’t need anything.

Wrapping It Up
I always end the email by thanking everyone for their continued help and support. Investors like to throw out ideas, but honestly, most of them are usually not that valuable. But I think it’s worth listening to 30 bad ideas to get that 1 good one that can really impact my thinking or the direction of the company. So I always encourage my investors to call, email, or share whatever they are thinking.

And that’s it. I don’t think this is any magic formula about how to communicate, so I encourage you to adopt your own format. The key is to make it regular, useful, and transparent. By forcing yourself to send it once or twice a month, you get used to writing it even when you don’t want to write it. If you wait until you feel like sending it, that will probably be never.

Someday, when Backupify is much further along, I may start publishing some of my early letters. I go back and read them regularly for some good perspective on where we have been and how my thinking about the industry has changed.

If you are a new CEO, I encourage you to take up this habit. It’s not just useful to investors… over time you will find that writing out your thoughts is therapeutic and will help clarify your thinking on major business issues.


5 Responses to “How To Communicate With Investors. Tips For New CEOs”

  1. Brian Whalley on July 12th, 2011 5:57 pm

    Nice article. When you send it out, is it to a list of all the investors that you have, or an individual to each?

    (That is, can they see each other on the list and see any reply-alls that the others make, or no?)


    Brian Whalley

  2. Matthew Bellows on July 13th, 2011 1:19 am

    Thanks Rob,

    Great post. We raised a seed round in April and so I started doing biweekly updates. I found it helpful to review progress and clarify the most important issues. I’ve moved to weekly updates now, because one of the VCs in the deal said “my best managed companies update weekly” and I want to be considered in that category.

    Net net weekly probably takes 10% more time, but the results are shorter, and thus more likely to be read. I thought it would be like water-torture for the investors, but they’re saying that I’m above-and-beyond in terms of keeping them in the loop.

    More than that, it’s helpful to look back at the end of the week and share the highs and lows - I’m completely with you when it comes to sharing bad news. It doesn’t feel so lonely this way.

    We’re coming up on a board meeting and I’m so looking forward to _not_ starting it with 15 “where have we been” slides. Keeping them up to date a little at a time helps make the hours we are actually together much more productive.

  3. Rob on July 13th, 2011 6:35 pm

    I bcc everybody, because they are busy and don’t need their inboxes filled with minor questions or “keep up the good work!” responses. But if someone replies with a good question or comment I send it to the entire group.

  4. Chris Combs on July 14th, 2011 6:08 pm

    I’d heard from several investors around Louisville that you do a great job at this. It was good to finally see the format. Props to Andy for the suggestion.

    Couple thoughts: I liked the idea of creating a few metrics (like user seats sold) to follow closely. Having to divulge that to investors often will keep you focused on results. Also, the “How you can help” section is a good idea. Adding and keeping new action items in front of investors prevents the whole value add thing from being just talk (which I’ve found is usually the case).

  5. How To Communicate With Investors. Tips For New CEOs : Coconut Headsets | Startups & Entrepreneurship | on July 18th, 2011 3:31 pm

    [...] How To Communicate With Investors. Tips For New CEOs : Coconut Headsets Andy Swan, one of my angel investors, asked if I would publish some of my investor emails. I’m not ready to do that, but I do think investor communication is important and difficult for new CEOs. Since several of my investors have commented that they like the format I use, I will share it here for those of you who may be interested. Source: [...]

  • About Rob

    Rob is co-founder of He likes value investing, the Rolling Stones, college basketball, artificial intelligence, economic history and people who think independently.