Flyer One Ventures has more than 50 startups in its portfolio, and I read their reports every month. I can say for sure – no one likes writing reports. And, believe me, investors are not crazy about reading looong pages of text either.
At the same time, efficient reporting helps the investor sleep well, knowing his portfolio company is doing well. It also allows him to see the picture more clearly and foresee possible difficulties.
There is no standardized template for a report to investors – everyone uses their own approach. Generally, investors expect to get information on only three key points: money, performance, and product updates. Your task is to cover them as clearly as possible.
Investors need to know how things are going with money, and financial statements are great for dealing with it. Let your investors know the sales dynamics, different costs, and the net result.
Burn rate is one of the most important metrics for an investor to know. The burn rate shows how quickly a startup spends its capital. It’s usually expressed in the amount of money lost per month. Its synonym: negative cash flow.
How to calculate: Money left / Monthly burn = Months of runway.
According to the CBInsights, 38% of startups fail because they run out of cash. The study cites improper financial planning as the key problem why your company may be off the game. That is why investors carefully analyze this metric.
In your report, it’s also important to mention your traction to prove the growth of your startup. You can provide an investor with traction through the indicators of your profitability, revenues, active users, registered users, and so on.
By reading startup’s operational metrics, investors understand how well the company is doing on the market and how effective the team is at attracting and retaining its customers.
There are more than 30 metrics you can find online to measure a startup. But according to the Databox report, the key operational data you should track are marketing and sales metrics.
Marketing: Cost Per Click, CPA, Return on Advertising Spend.
Sales: Lead Conversion Ratio, Lead-to-Opportunity Ratio.
For an early-stage startup, it’s enough to send these metrics to investors.
If your financial or operational performance has gotten worse, the report should briefly describe possible reasons and how your team is fixing it.
Monthly reports are often accompanied by a call with an investor, during which the fund gives advice and helps with some of the challenges your company is facing.
Users have asked you to add a new feature and you've done it? Have you figured out how to make the user experience more efficient? Have you added to your app the possibility to donate to Ukraine’s Armed Forces? Tell an investor about it — we are always interested in what has changed in the product we support.
It’s important to specify the benefits these changes bring to your product: they might save time, increase customer retention, allow you to increase the average check, and so on.
Other things to add
When you've completed your report on the three key areas, you can relax and think about other important goals you’ve reached over the past month. These might be:
A PR win. TechCrunch, The New York Times, Forbes, or other prominent media have written a story about your company.
A recruitment win. If you’ve hired a “star,” give your investor a brief summary of what this specialist has accomplished previously and how their expertise will help your project grow.
A partnership win. Tell investors about other big companies interested in cooperation with you. This proves to the investor that you’re in demand and moving in the right direction.
When reporting every month to your investors, the main rule is to be honest and speak out about problems (if there’s any). Investors are as interested in the growth of your startup as you are.