The Investor
Relations Field Guide

Call me? Reporting on the stuff that matters

You’ve done the hard part; you’ve secured the cash or the portfolio addition that you were looking for. But now comes the next challenge - keeping everyone happy with relevant updates.

The metrics used to keep track of a portfolio company’s progress differ from investor to investor. A whole flurry of acronyms can sum up the many ways investors like to track progress - KPIs, CAC + LTV, GMV, OMTM… but for most, a monthly update is sufficient, the contents of which need to be hashed out between both parties early on. 

One of the best strategies that many of the serial entrepreneurs we interviewed recommended is to write the deck for your next round as soon as you close this one and agree on a North Star metric and expected growth. You can then add in any specific metrics and measurables that each party wants to see on top of that.

“The metrics we use depend on the business - you need [relevant] data to be able to ask the right questions,” said one investor.

“We can over-document and over-tool all the dashboards so we cannot make decisions. Less is more.”

This pre-seed/angel investor agrees. “If they want to share metrics I want the important ones,” she said. “It's about effective communication - not reporting.” This more relaxed approach keeps everyone honest and takes the pressure off, she added. “Teams trust me about the bad and the ugly - the relationship is there.”

Some investors feel they have to push for the information they need. One seed investor said that ‘90%’ of the companies he worked with were bad at keeping him up to date. “If they’re pre-revenue, [we need to be aware] of their pipeline and engagement.”

“If I invested in a company I want to drill down in the dashboard,” said another angel. “Some founders really need to be pushed about metrics; sometimes it comes from a lack of knowledge, [and] sometimes it comes from embarrassment because the numbers aren't great.”

One common response we received from investors was that they preferred more frequent, concise updates - but the timeline is subjective. One investor said that the best founders ‘generally keep me up to date monthly’, whereas another argued that ‘if you only [see reports] once a quarter, you end up having recency bias’.

Managing expectations on both sides is key - you might be happy with a monthly call, they may want weekly communication. If contact levels are a dealbreaker, this needs to be communicated and compromised on long before you sign on the dotted line. Top tip: don’t ignore those calls for too long.

“It’s the companies that are ‘all over the place that I need to deep dive,”

said one investor, with many more in agreement that when the communication from a founder stops, the call volume goes up.

And if phone calls aren’t your thing, a few founders and investors have recommended telegram as a more informal channel that’s separate to non-work communication that lives in WhatsApp.

Airtable had a lot of fans from the investors we spoke with, with Trello’s Dealflow another highly rated programme. “Data and venture is a competitive advantage,” said one pre-seed/angel investor. “We believe being well organised and structured with data is what we need to do to succeed for our LPs, and differentiate in the market.”

Ultimately, the best founders appreciate that investor updates are not really about the investors. This is your chance to get your head out of the weeds, stop firefighting for a second and reflect on where you’re at, what’s going well (and should be celebrated) and where there is room to improve. 

Use the time to lean on your investors’ experience, and appreciate the chance to take a wider perspective on what your company looks like.

SOS: Asking for help and leveraging your VCs for more support

Unsure about how to manage a fallout, or put out the latest fire on the horizon? Here, we detail how to have those tough but necessary conversations.‍

Communicating effectively is the best way to avoid any unexpected surprises on either side, and it’s inevitable that founders will need to lean more on their investors at certain points of the company’s cycle.

Sharing bad news with stakeholders early is key. Although painful, the earlier you have the difficult conversations, the better. Often founders will wait too long to share bad news, in turn making it harder for investors to help - “they have less runway, less energy and less buy-in.”

Investors seem fairly unanimous in encouraging founders to call with an issue.

‘Don’t be afraid to over communicate’

said one, while another urged, ‘If something bad happens, call me - don’t wait.’ But this might be easier said than done for a founder determined to focus their energies on problem solving without alerting external parties.

One seed investor acknowledged that asking for help was hard for many founders. He suggested: “You need to create a safe environment and coach them on how to ask for help. If I wait for them to ask for help it's too late - I want to be in the trenches with them.

“I’ve seen so many founders scared to communicate negative news - but often these are the best people to help if things aren’t going well,” added one founder.

“It’s not my job to be a good news machine - [founders need to be able to] communicate the bad news too.

Another angel investor said that in her experience, some startups simply don’t want assistance from angels. “They don’t value the expertise,” she said. “Sometimes they have advisors [that] step in instead of investors. That [can make it] difficult when they come to raise their next round.

Some founders are grateful for advice. Several told us that one major value-add their investors can offer is to help them with senior hires. Using investors to interview potential new recruits is a great strategy - it helps reassure and excite new team members that the startup is a good career choice.

Being ‘founder friendly’ has become an important aspect for many leading investors and from the interviews, it’s clear that this now goes beyond the term sheet, it’s about value add once you’re on the cap table as well.

However, some founders recoil at the thought of interference. 

Several founders exclaimed that some of their investors only pay lip service to support. When they had ended up sharing bad news, often investors would sink their teeth in and want minute-by-minute status updates of the problem or worse, disengage completely.

One investor joked that “the perfect investment is one where you put money in, not hear anything from and then get a cheque in 5 years when they exit and return the fund.” 

Probably the most common test of the founder and investor relationship is the pivot. It can be tough for both founders and investors to get on board with this. Founders might forget that investors don’t operate in the same business the same way, so will likely need time to get up to speed and understand the pivot. Or worse, just because one investor is on-board it doesn’t mean that everyone else is.

Again, the question of career investors vs former operators as VCs raises its head. Past operators, be gracious enough to understand that past experience may not fit exactly with the current situation you’re trying to fix.

“As a founder you often don't want to have a boss so sometimes it becomes an ‘us versus them’ [scenario],” admitted one founder. 

If all else fails, peer group support could play a big role.

“People don't seek [out] help day to day - taking a network approach can really help,” suggested one angel investor. “Success breeds success, so maybe more successful companies [should] talk with each other more.

Building and maturing an exec board

Who should be on your board? What should you discuss? When should meetings be held? Here’s our deep-dive into structuring your board:

Communicating at board level brings about many more challenges. One company’s board will look completely different to the next, and so they should - different startups, stages and people mean there is no blueprint for how your board or meeting schedule should look.

Most repeat founders and seasoned investors agreed that a company should generally consider building a formal board in the run up to Series A, however, deep tech companies can have them much earlier to provide commercial structure.

However there was one phrase that we heard several times during our interviews in relation to exec boards - ‘pale, male and stale’. Building a diverse, strong leadership board is imperative. You need people who will ask the right questions, assist in tough times, represent the true nature of the product you’re trying to create, and crucially, keep you out of legal trouble.

With these aims in mind, it won’t always make sense to have your investor on the board - and much of the time, they might not want to. Being open and honest about why an investor should/shouldn't join the board is a key, and often uncomfortable, conversation to have.

Of the investors we spoke to, the majority said they did not require a board seat with their investments. Too much admin, additional legal responsibilities, and the idea that ‘if you do it for one company, you have to do it for all of them’  were among the reasons cited. However, in lieu of a traditional seat, many said that they required the option of an observer seat instead.

One pre-seed to seed investor identified that boards weren’t always the right structure for early stage startups. But even if that’s the case, “if we’re putting in £2m, we want an observer seat,” he added.

Most investors acknowledged that they should only be on the board if they added value, and that in the early days, the function of the board should be helping the leadership ‘get out of the weeds and view things in the medium-long term’.

One founder advised his peers to bring on board members “aligned to what you want, especially when you pivot. They might not be pivoting with you”.

Several people noted that a board should be flexible, reviewed frequently and, as one investor said, easy to change: “The board you have when you're in year two should not be the same as the one you have in year four”.

The larger the round and the later stage the company, the more VCs will want board seats - it’s the tool for control and influence. “The closer you are to a public company, the more you have to start acting like one,” noted one investor.

It’s vital that when someone stops adding value to the board, a frank discussion is held to work out the best course of action for the company. One interviewee mused about how to get investors off the board once they’re embedded, adding that

some VCs in Europe ‘cling onto boards like vampires’. 

At around Series A level, it may be worth exploring the idea of hiring an independent chairperson to the board to help navigate complex situations, bring in extra credibility and open doors to the next round. They can also help steer the ship, be an ally to founders, push back on VCs and support with the admin overhead that an executive board brings.

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The board can be a good place to deep dive into financials, forecasts and company direction - one investor told us it’s ‘the only place we can have influence’. However some argue that it’s a function that could be cut altogether. One founder complained: “There is no deck or pre-read agenda - it’s just a meeting.

It's a relic of an activity that lives from public companies.”

One trend many investors and founders noted is that board meetings are frequently being used as a reporting mechanism. While some welcome this as a time-saver, most aren’t keen to use the time to go over reports, and suggested that updates should be sent in advance and assumed to be read before the meeting starts. 

Productive board meetings should be short and sweet. “Boards force you to structure your quarter and structure your cadence. If you have more than three action points from a board meeting, you're never going to get anything done,” said one Series B startup. “Keep it to one bullet point per metric.”

When you have a few well-known names on the board, there’s always the potential for egos to get in the way of business.

It can turn into a “d-ck measuring contest”, said one founder, as VCs try to outsmart each other.

“One really good tactic I have found is to use the board as a momentum machine for the rest of the company,” said the founder. “ You can also bring in senior members of the team so they can grow, learn and show-case what they have been working on - it’s a real morale booster.”

So what does a good and bad board meeting look like? One investor told us:

“A great board meeting - [we had] an exited founder to manage the board. They understood the risks and timed everything well; there were strong follow ups and a call with other investors for our input,” she said. A bad board meeting leaves you with a far less positive mindset - you’ll walk away with a serious to-do list, VCs don’t hear anything for a long time, and there's no follow up at all, recalled the investor.

“The worst board meetings are not productive - it turns into a dog and pony show,” added one seed investor. “It’s the work in between the meetings that counts.”

Dealing with the fallout: Arguments, faux pas and relationship killers

Things don’t always go to plan. With any professional relationship, partners will likely unintentionally jeopardise their positions or fall foul to various pitfalls. Here’s how to navigate disputes without taking a wrecking ball to the business.

For some founders, the first round of fundraising can be their first major leap into the business world. They may never have needed to forecast financials, sales, and manage both a team and the expectations of people whose cash they depend on.

Taking the time to evaluate and perform due diligence on potential partners in the beginning is never a waste of time - it’s a fundamental part of your business structure and it really matters when things go wrong.

Co-founder disputes can be one of the messiest things founders and investors get dragged into. Sometimes investors can be used to mitigate the situation - but this is another instance in which a good chairperson can come in handy. They can act on the founder’s side, whilst also looking at the company’s interest.

Replacing the CEO of a company is a rare but incredibly stressful occurrence, according to the conversations we held with investors. However, when it does happen, it is out of necessity and a duty to put the business first.

“As investors we have to protect our investment, which is looking at the interests of the company more than those of the founders,” said one investor.

Sometimes, noted one investor, the challenge is that the need to replace the CEO isn’t due to malpractice or negligence, but that the company has outgrown the founder. At this point, the company’s best chance of success is to introduce new leadership to continue its path to growth, and difficult decisions need to be communicated.

As time progresses, an obvious souring point for the founder/investor relationship is poor company performance. “ [A startup] can be growing, but not fast enough for venture returns, and this is really frustrating for founders,” explained one seed investor. “They can start feeling upset and defensive, they start worrying about the company even more, leading to a spiralling situation.”

On the point of growth, one startup lawyer that we spoke to advises founders to

“look really carefully at what constitutes a “bad leaver” in your term sheet”

to avoid getting burned if the company outgrows you. 

Another of common frustrations investors have with founders is the management of forecasts and plans. Of course plans change, however, if you move the target between board meetings and do not communicate that effectively it can be a quick way to lose trust and have a board meeting derailed.

Several investors told tales of individual bad apples - the London-based CEOs who moved to the US on the company’s dime, and didn’t get board approval, for example; the uncommunicative founders who buried their heads in the sand when things got tough, or the sales people who failed to forecast correctly. 

And according to some of the founders we spoke to, investors aren’t blameless either. “The VCs [we’ve worked with] are complete bullshiters just kicking the tires, especially as they have multiple portfolio companies in our space. They want to understand the market and manipulate the competitive landscape,” claimed one founder. 

“Those who haven't been operators just try to copycat the big VCs. They don't understand [the] people, culture or strategy - just pre- and post- deal money.”

Moving onto bigger things: Raising the next round

Use what you’ve learnt from your experience as you come full circle and start thinking about that elusive next round of fundraising. 

One of the most commonly cited ways in which investors could help their founders is to assist with access to capital for their next round of funding.

And while your investor partners should be on hand to assist in finding and qualifying potential new investors, don’t leave the ball entirely in their court. “Do not only get in touch when you need money,” admonished one pre-seed/angel investor. “Be an advocate in helping encourage the next round.”

Again due diligence for new investors is super important, especially if you’re raising from international VCs. Here your existing investors should help open doors, and a brand name (angel or VC) on your cap table from the previous round can be very helpful in getting those pitch meetings lined up.

Remember, often the first thing new investors will do with their due diligence is reach out to your current investors. They need to have good things to say and be on board. 

Understanding the milestones for the next round as early as possible is vital here, and get clear alignment on what you can expect from your current investors as follow-ons. One founder we spoke to had their round flipped upside down when their lead VC in the previous fundraising round did not take their pro-ratas. Not only was this a £2million hole in their current round, but it also sent a signal of worry to the new investors.

Results like this can be hard for founders to understand -

“just because we fought hard for our pro-ratas doesn’t mean we will execute them”,

one told us. But the process is tough - investors then have to go back to the investment committee to do follow-ons, and there might not even be enough reserves in the bank to invest.

Inevitably, all of your communications, reporting, mistakes and victories lead to building your valuation and raising that vital next round of cash. “Milestones are always about the next round,” said one pre-seed/seed investor. “ 

For example, he said, a Seed at £30,000-50,000 MRR is a key metric in terms of introductions to the next round. “This is when I can then go to town in helping you raise.”