I began writing this post back in February, but Jason wrote on the topic last week, which got me to revisit my own version.
Sharing monthly investor updates is valuable - certainly for the investors involved with the company, but equally so for a CEO. It forces a CEO to take inventory of a company’s progress at a regular interval that is typically more frequent than board meetings and quarterly milestones. It forces the leader of the business to look up from her desk every 4-5 weeks and assess performance of the broader organization. In my portfolio of seven current investments, roughly half deliver regular monthly investor updates. While somewhat unscientific, I think the CEOs that are religious about their monthly updates seem to be making more consistent progress, accomplishing more as a team and fostering a more collaborative spirit with their investor syndicate along the way. Of course, there’s a natural bias at work here since I may know less about how things are going at companies where the CEOs are less communicative, but when I think back across the 18 or so startups with which I've been involved since 1998, it feels accurate to say the more communicative CEOs have generally been more successful (Brad Feld makes a similar point here). As Jason rightfully points out, when investors don’t know what’s going on inside a company for a prolonged period of time, more often than not, what is going on is less than ideal. Some CEOs with whom I’ve discussed this tell me they see these updates as a distraction or time sink. While I appreciate this perspective and understand there’s no right way of doing things that works for everyone, it's important to consider the value captured in these updates for the CEO herself. In the heat of running a startup, it’s so easy to get lost in the weeds and before you know it, a few months have passed without significant progress towards your near term goals. Monthly updates address this issue by forcing business leaders to take stock, but also ensuring there are no surprises - either for the investors or the CEOs.
The best monthly updates I’ve read communicate the following points (this may be a Y Combinator format, not sure):
Objective tracking metrics
Cash in bank
Monthly spending
Monthly revenue
Runway (# months)
Key metrics (These are unique to every business but oh-so important to establish and track. The best businesses I've seen establish 3-5 metrics and track them religiously.)
Subjective tracking points
Milestones
What we’re working on
How you can help (This is an opportunity to solicit help. It may be more appropriate at earlier stages when there are a bunch of angels involved and less appropriate past the Series B, but there are almost always things an investor syndicate can do to help a business.)
There are a bunch of other things that can be incorporated into a monthly update and a bunch of formats or styles that work, but these eight points are straightforward and relatively easy and painless to assemble. It makes investors feel good and helps CEOs keep focus. Overall, I think it's a win-win and encourage any CEOs reading this to give them a try.