I don’t mean keeping your investors close like keeping your enemies close. No. What I mean is, keep your investors informed about everything that is going on with your company. It’s very important for them to be aware of the real situation you’re in. If you’re a startup or a growing software business, you’re going to run into issues and challenges. You will have bottlenecks and setbacks. The worst thing you can do it to try and hide those, hoping they'll go away. They won’t. They will only get worse.
1. It’s better to over-communicate.
Investors have put their own money into your business. Therefore, the investment they have made is very personal to them. It’s better to inform them about everything. When you have a problem, you over-communicate, not under-communicate. But don’t burden them with details that have no meaning. Don’t offload on them execution issues that they shouldn't worry about and that you’re being paid for to solve or manage. It’s not about creating noise for your investors and extra work for yourself. It’s about highlighting facts. Be quick, crisp, and clean.
2. What you don’t want to say, you must.
When real issues crop up, you usually spot them right away. These are the things that surprise you, things that are harder than you thought they'd be, things that become a bigger cash problem for your company than you’ve anticipated, things that could pose a risk in the future, things that make you feel uncomfortable for some reason. Trust your gut. It will tell you what’s important and what’s trivial. Anything that makes you squirm at the thought of speaking about with your investors is exactly what you need to discuss. Do it without hesitation. Bring it up early. Don’t sugarcoat it, don’t beat around it, relay specific facts. A bad conversation is better to be done with quickly.
3. Regularly communicate up.
You must communicate with your investors constantly, from day one. Don’t withhold things. They simply want to understand what’s happening. When things are going not as fast as you want them to, or not as good, they need to know about it. However, they don't care much about the current situation, they’re more interested in what direction you’re moving. Even if the current numbers you’re sharing — the cash position, the number of customers you got this week — are not meeting their expectations, it’s more important for them to know what you're planning next, how will you address the potential challenges, and whether or not you understand the problem. They want answers to questions like, “How can it be turned around?” and “What is the trend?” and “What will you do about it?”
4. Always include a bigger context.
It’s so simple and logical, yet so few people do it. When you present your numbers, don’t just talk about the actual situation. Always include it in the context of something else, something bigger. What are you benchmarking against? Is another company doing something similar? How do you stack up against the overall market growth? How are other parts of your business developing? How do they compare to each other? Which parts perform better? Worse? Most importantly — and this is often missing from reports — compare it to the past. Show your progress. Numbers don’t mean anything unless you provide context. Add insights. Add bullets that explain trends or spikes or drops.
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