Given that small institutional seed rounds are becoming more and more common, I thought I’d share a few of my thoughts on how to best communicate with investors.  After raising this sort of round, it’s usually the first time an entrepreneur has to think about putting some structure of investor updates and communications.  These aren’t set in stone, but some practices that I think make sense and have been effective.

1. Do investor due diligence.  Before thinking about investor communication, I go back to the importance of doing due diligence on your potential investor to understand what their expectations are and what their behavior is typically like.  My partner Dave blogged more about that topic here. The worst thing is to be misaligned after the investment about what you think is appropriate for the company and what your investor might think makes sense. 

2. Establish a board, or a board-like governance structure.  This seems intimidating, but has many benefits.  First, getting investors to commit to board involvement is a great way to make sure your VC is committed to your seed round (that is, if you have a large VC in your round).  Second, if you are planning to raise VC money in the future, it’s helpful to have established the cadence of regular board interactions early, and I think it’s actually good discipline to do this and get regular feedback from your board members.  Plus, it helps you work out the kinks of running a board so it’s not such a shock to the system come the series A. I typically prefer small boards of just 3 people.  Larger ones can work too if everyone collaborates well together.  The nice thing about small boards is that you can also invite your strategic angel investors to come periodically to contribute as well without things getting too unwieldy. Just make sure they do their homework beforehand and can contribute! 

3. Some of our portfolio companies have informal boards.  It’s more of a regular investor “stand up” meeting that is pretty efficient.  But the expectation is that the major investors are present and engaged, and for the most part, this has been true.  Sometimes, our co-investors have sent 2 partners to these meetings, so it’s nice to know that it’s being taken seriously.  Of our 13 portfolio companies, 10 had/have formal boards during the seed stage, and the rest had a more informal structure. 

4. Make investor communications short, but frequent. I like the cadence of a 1-2 hour board meeting every 4-6 weeks. In the meantime, a weekly or bi-weekly update I think is helpful to keep investors caught up (I prefer this in email form because it’s more efficient for everyone).  The goal of this level of communication is not to get the approval from your investors on your performance.  The goal is to make sure that your investors are armed with the information they need to help you.  

5. Pre-wire and focus. The goal of your 2-hour board meeting should be to spend as little time as possible on general updates and non-critical governance issues. Regular business updates should already be absorbed by your investors through your written updates.  What you do want to spend time on is the 1-3 most critical strategic issues that you are facing and need practical help on. I’m an advocate for a quick chat with board members a few days before the meeting to say “ok, you get where the business is right? Can we agree to focus 50%+ of our time on issue A and B?”.  This is a good way to introduce tough conversations too, so that you don’t get an unthoughtful gut reaction, but a constructive discussion about challenging issues like fundraising, missed targets, disfunction in the exec team, etc. 

6. Give assignments and follow up.  I’m always surprised when investors need to ask “how can we help?”.  Remember, we all tell our LP’s that we are immensely helpful to our portfolio companies, so make us follow through on that!  The best way to make sure that investors follow through on what they say they will do is to get them to say what they will do publicly and follow up publicly.  A follow up can be an email that says “as next steps, thanks in advance to investor A helping with X, investor B helping with Y, and thanks to investor C for already doing Z!”. 

I’ll probably blog about more on this topic from time to time.  But for more reading, check out Brad Feld and Steve Blank’s posts on reinventing board meetings.  They have way more experience with the topic than I do. Also, thanks to Rob May at Backupify who helped shape some of my thinking here as well.