So you had the idea, built the company, and landed the funding.
Now, you have a venture capital firm (or multiple) rooting you on and they're waiting to see a return.
That can be a lot of pressure, but it's also an opportunity to form a long-lasting relationship with your investors and to gather wisdom and guidance along the way.
Lolita Taub, general partner at Ganas Ventures, and Gale Wilkinson, founder and managing partner at Vitalize Venture Capital, shared their thoughts on how founders can better communicate with their investors for the most successful, productive partnerships:
While many firms will have established processes for checking in with startups, getting in touch on a regular basis can help both parties.
"Many founders in our portfolio reach out more often than [our quarterly meetings] to ask for help and guidance on a number of things, from connections to customers and key hires to tactical or strategic feedback," says Wilkinson. "Most of the time, the founders who proactively reach out to us and write well-organized, regular updates outperform others."
Don't be shy when asking VCs for help: Once you've secured an investment, it's because they believe deeply in the value of your mission, and you should leverage that support to its full advantage.
Taub echoes the importance of communication, saying that she values founders who involve her in strategic decisions and seek her guidance.
"Building a productive partnership involves co-creation, mutual learning, and leveraging community connections," she says.
In addition to asking questions and asking for help, be prepared to provide thorough, transparent updates. Wilkinson suggests startups keep updates to one page or less, and follow this structure:
Summary
Thank Yous
Operations Update
Key Wins, Key Challenges
Help Needed
She says that the Help Needed section in particular is useful for investors, so they can keep your company top of mind and have your biggest challenges in writing.
"Best of all, these updates are a quick way for founders to take a step back on a regular basis to reflect on what progress they are making, what is going well, and what isn't going well," says Wilkinson.
Added tip: Founders can repurpose their investor updates to create a version to send to advisers, friends, and prospective investors, all of whom can offer support along the way.
For Taub, the most helpful updates include not only key metrics, but also progress against milestones, community engagement initiatives, any significant developments or challenges, and asks.
Getting a startup off the ground can be a bumpy ride, and not everything goes as planned. That's expected, but transparency and clear communication with investors is the best way to get through challenging times.
"Tell us about it right away. I've seen many public cases where VC-backed CEOs do not handle crises appropriately," says Wilkinson. "As a VC, we are here to help, and crisis management is part of that."
She says a common area where transparency is lacking is with startup revenue. Be honest with your investors, she cautions.
Taub agrees that honesty is a priority, and that founders should be communicative and transparent during rocky times.
Involving investors early on allows them to help your startup more effectively and gives you a larger support network for coming up with solutions and contingency plans.
Occasionally, founders and investors can have differing opinions when it comes to the best course for the business.
While this can be uncomfortable, it can also lead to constructive conversations when done in a respectful and open-minded manner.
Taub says founders should present their rationale using data and market insights. She can then have conversations around those metrics to find common ground and collaborate.
For Wilkinson, she's aware that startups belong to founders, saying, In my opinion, the founder is always right.
But it's important to remember that VCs have a vast amount of experience and knowledge, having worked with many startups, and they might know something you don't.
"It's helpful to at least consider what a VC says," says Wilkinson.
Like other relationships, a relationship with your investors is only what you make it. VCs have accumulated a lot of knowledge, data, and experience from working with startups, and are often eager to help the startups they've invested in.
By building a communicative, transparent, collaborative relationship with your VCs, you can tap into that shared knowledge and make your startup better for it.