Apr 9 2007 by Brad

Communicating with Your Angel Investors

Question: Hey Guys, I’m new to the CEO gig and want to keep my angel investors informed with some sort of regular communication…Maybe a quarterly or even monthly letter.  What kind of things should I put into it?  What are they going to want to hear about?  How do I keep from saying something stupid, but still give them quality information they’ll find useful?  How do I position less than great information so it won’t freak them out but still get’s the info across?

(Brad) Before we get into the discussion of content, let’s start with frequency.  Every CEO in any angel deal I’ve been involved in starts off strong – planning (or even promising) monthly communication with his angel investors.  The half life of this promise is usually two or three months – very quickly the communication becomes every other month, then quarterly, then semi-annually.

This stinks.  Many angel investors are low maintenance, but they love to hear about what is going on with their investments.  A consistent rhythm of communication – I prefer monthly – helps the angel investors understand what is going on with their investment and gives them clear points of engagement with the CEO and the company.  Someone wise once told me “if you are going to communicate something, do it consistently.” 

Since most angel deals are early stage investments, the focus is often on the products, markets, early customers, people, financial, and financing.  I recommend a short (no more than two page) monthly email that covers the same set of topics, formatted in a way that is easy to put together (there is no value in a “fancy” document.)  Email is better than an attachment as it can be read quickly and responded to if appropriate.

Blunt, direct, and clear is always best. Don’t spin – just talk about what’s working, what’s not working, and where you need help.  Most angel investors understand that the business they are investing will have plenty of ups and downs – hiding this isn’t helpful.  However, be careful not to err on the other side and be too pessimistic either (e.g. don’t write you update letter after a long weekend that you spent at the office trying to get your crashed server back up and running.)

Finally, keep your angel investors informed about your financial status.  Many of them are the likely source of at least part of your next round of financing.